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Research and Innovation Observatory country reports series Dőry, T., Csonka, L., Slavcheva, M. 2017 EUR 28524 EN RIO Country Report 2016: Hungary
Transcript
Page 1: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

Research and

Innovation Observatory

country reports series

Dőry T Csonka L Slavcheva M

2017

EUR 28524 EN

RIO Country Report 2016

Hungary

This publication is a Science for Policy report by the Joint Research Centre (JRC) the European Commissionrsquos science and knowledge service It aims to provide evidence-based scientific support to the European policymaking process The scientific output expressed does not imply nor prejudge policy positions of the European Commission Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use that might be made of this publication

Contact information Email JRC-B7-NETWORKeceuropaeu

JRC Science Hub httpseceuropaeujrc

JRC105927

EUR 28524 EN

PDF ISBN 978-92-79-66732-9 ISSN 1831-9424 doi10276096252

Luxembourg Publications Office of the European Union 2017 copy European Union 2017

The reuse of the document is authorised provided the source is acknowledged and the original meaning or message of the texts are not distorted The European Commission shall not be held liable for any consequences stemming from the reuse

How to cite this report Dőry T Csonka L Slavcheva M RIO Country Report 2016 Hungary EUR 28524 EN doi10276096252

All images copy European Union 2017 except for the ERA Dashboard image on the first page by Niels Meyer licensed under CC BY 20

Research and Innovation Observatory Country Report 2016 Hungary The 2016 series of the RIO Country Report analyses and assesses the development and performance of the national research and innovation system of the EU-28 Member States and related policies It aims at monitoring and evaluating the EU policy implementation as well as facilitating policy learning in the Member States

Print ISBN 978-92-79-69879-8 ISSN 1018-5593 doi102760564889

2

Contents

Foreword 3

Acknowledgements 3

1 Main RampI policy developments in 2016 5

11 Focus on National and Regional Smart Specialization Strategies 5

2 Economic Context 6

21 Structure of the economy 7

22 Business environment 7

23 Supply of human resources 7

3 Main RampI actors 8

4 RampI trends 9

41 Public allocation of RampD and RampD expenditure 9

42 Private RampD expenditure 10

43 Public sector innovation and civil society engagement 11

5 Innovation challenges 11

51 Challenge 1 Fostering innovation in domestic enterprises 11

Description 11

Policy response 12

Policy Assessment 12

52 Challenge 2 Enhancing the cooperation between science higher education and

business 12

Description 12

Policy response 13

Policy Assessment 13

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms 13

Description 13

Policy response 14

Policy Assessment 14

54 Challenge 4 Supplying the RampI system with high-skilled human resources 15

Description 15

Policy response 15

Policy Assessment 15

6 Focus on creating and stimulating markets 16

References 19

Abbreviations 23

Factsheet 25

List of Figures 26

3

Foreword

The report offers an analysis of the RampI system in Hungary for 2016 including relevant

policies and funding with particular focus on topics of critical importance for EU policies

The report identifies the main challenges of the Hungarian research and innovation

system and assesses the policy response It was prepared according to a set of

guidelines for collecting and analysing a range of materials including policy documents

statistics evaluation reports websites etc The quantitative data are whenever

possible comparable across all EU Member State reports Unless specifically referenced

all data used in this report are based on Eurostat statistics available in January 2017

The report content is partly based on the RIO Country Report 2015 (Dőry and Slavcheva

2016)

Acknowledgements

The report has benefited from the expert advice provided by representatives of the

governmental institutions of Hungary

The report has benefited from comments by Fatime Barbara Hegyi and Alexander

Kleibrink from Unit B3 JRC EC

The comments from DG REGIO and DG RTD are also gratefully acknowledged

Authors affiliation

Tibor Dőry Szeacutechenyi Istvaacuten University (Győr Hungary)

Laacuteszloacute Csonka IKU Innovation Research Centre Financial Research Co (Budapest

Hungary)

Milena Slavcheva European Commission Directorate-General Joint Research Centre

Unit B7 Knowledge for Finance Growth amp Innovation (Brussels Belgium)

HIGHLIGHTS

In Hungary the economy grew by 29 in

2015 and is expected to remain relatively

stable in 2016-2017

The budget deficit has been kept under the

3 level since 2012Between 2013 and

2015 the budget deficit was further

decreased from 26 of the GDP to 20

The Hungarian industry is characterised by

the dominant role of foreign controlled

companies and strong export orientation

Foreign controlled enterprises accounted

for 574 of the total production value in

the Hungarian economy in 2014

The unemployment rate in Hungary has

been constantly decreasing since its peak

in 2011 of 112 down to 77 in 2014

and 68 in 2015 The main active policy

tool to achieve this result has been the

Governmentrsquos public work scheme

Although Hungary is still a service-driven

economy during the past five years the

share of industry (gross value added of

GDP) has grown from 219 to 229

between 2010 and 2015 (without the

construction sector)

GERD has shown an upward trend with a

rather strong growth rate between 2008

and 2013 At the same time RampD funding

by the government has not increased

proportionally Contribution from the

private sector grew faster and since 2007

the private sector has been the main

contributor to GERD The structural funds

are a major source for RampD funding

MAIN RampI POLICY CHALLENGES Fostering innovation in domestic

enterprises The level of innovation

activities among the Hungarian

companies is generally low especially

that of SMEs A major reason for that is

the high concentration of RampD activities in

large multinational companies It has

been a high priority of the government to

boost business RampD in the last decade

through tax incentives and direct

measures supporting business RampD

Enhancing the cooperation between

science higher education and

business Supporting cooperation

between business and academia has been

a high priority of the STI policy in

Hungary that resulted in a number of

positive developments such as the

growing number of corporate research

centres and RampD labs As these

partnerships usually last until they run

out of public funding sustainability of the

cooperation is a real challenge

Reinforcing the RampI governance and

transfer mechanisms Frequent

changes in the institutional set-up of the

Hungarian RampI system have led to a

situation in the financing period 2014-

2020 in which RampI governance lacks

experienced employees The recently

established centralisation of all major RampI

resources could potentially speed up and

simplify the access to RDI funding

resources

Supplying the RampI system with high-

skilled human resources Currently the

level of human resources of science and

technology (HRST) is still lagging behind

the EU average Since 2013 the number

of RampD units and the number of RampD

personnel has been decreasing although

differently in the various sectors The

government tries to turn about this trend

and puts a lot of emphasis on the reform

of higher education focusing on more

SampE graduates strengthening the

doctoral studies and forming long-term

basis of the RampD funding of HEIs

MAIN RampI POLICY DEVELOPMENTS IN 2016 Peer review of the Hungarian RampI system H2020 Policy support Facility

Infrastructure development of the higher education organisations

National technology and intellectual property venture capital programme and Smart

specialisation venture capital programme

5

1 Main RampI policy developments in 2016

Peer review of the

Hungarian RampI system

H2020 Policy support

Facility

The peer review panel summarized the experiences in

seven main policy messages 1) Hungary has a vast

science and innovation potential which can be exploited

through reform and sustained increases in public funding

2) RampI vision is needed shared across government and

stakeholders 3) A structured involvement of stakeholders

is needed in overseeing the operations of NKFIH to

increase transparency and responsibility 4) Improved

processes for evaluation and funding of RampI programmes

and projects needed 5) Researcher careers should be

made more attractive 6) More favourable business

environment and 7) Stronger cooperation between public

and private RampI actors

Infrastructure

development of the

higher education

organisations

In addition to GINOP calls published in 2015 focusing on

strengthening research infrastructures and in line with the

higher education strategy a new call EFOP 421 was

announced in November 2016 to support the

infrastructure development of the higher education

organisations with a budget of euro935m from the Human

Resources Operational Programme (EFOP) In order to

support the smart specialisation of Hungarian HEIs the

EFOP 361 call was launched in July 2016 The

programme has a budget of euro645m and aims to improve

the framework conditions of research and innovation

social innovation to reinforce the knowledge base and

transfer mechanisms at HEIs

National technology and

intellectual property

venture capital

programme and Smart

specialisation venture

capital programme

Two large financial instruments were introduced with a

combined budget of euro3226m falling under the category of

refundable measures The first programme will have a

total budget of euro1613M out of which euro645m will be co-

funded by the National Development Bank in addition to

the GINOP resources The primary aim of this fund will be

to ensure complementary funding for those companies

(including start-ups) that will be nurtured by the

incubators

11 Focus on national and regional smart specialisation strategies

Description and timing After consultation with stakeholders and definition of sub-

national (ie county) level specialisations the National Smart Specialisation Strategy

2013-2020 was adopted by government decree 16402014 (XI14) on 14 November

2014 It outlines three national specialisations systems science smart production and

sustainable society The strategy lists six ldquonational sectoral prioritiesrdquo focused on specific

sectors or technological areas two ldquohorizontal prioritiesrdquo (including ICT and inclusive and

sustainable society with viable environment) and a number of ldquosmart technologiesrdquo

(NIH 2014a) The government decree also approved the Hungarian participation in the

Roadmap of the European Strategy Forum on Research Infrastructures (ESFRI) as it was

envisaged in the document ldquoResearch infrastructures in Hungaryrdquo (NIH 2014b)

New developments The implementation of the National Smart Specialisation Strategy

has begun under the supervision of the National Research Development and Innovation

6

Office (NKFIH) The defined specialisations of the S3 strategy are embedded in the calls

of the NKFIH that were published for the new programming period 2014-2020 The

Office aims to ensure the implementation of the S3 strategy through a wide portfolio of

competitive RDI calls The budget of various calls is defined by the Annual Development

Framework that serves as an ldquoimplementation planrdquo of the S3 strategy The operative

portfolio of RDI calls is available on the NKFIH website1

Until the end of September 2016 the NKFIH published RDI calls with a total of euro168bn

(HUF521bn) framework budget out of which euro4435m (HUF1375bn) was allocated to

RDI projects

Outstanding issues Competitive RDI calls in the period 2015-2016 focus on three main

priorities i) support of RDI activities of companies ii) development of RDI infrastructure

and capacities and iii) support of collaboration between academia and business These

new RDI calls consider the S3 priorities in the following ways the RDI calls contain

explicitly S3 priorities within the stated objectives of the calls and the evaluation

process favours those project proposals that are in line with S3 priorities Consequently

the strategic objectives of S3 are realised at the level of the entire RDI portfolio

2 Economic context

In Hungary the economy grew by 31 in 2015 following the 4 growth in 2014 That is

a sign of a solid recovery that started in 2013 with a sustained rate of growth between

2-4 - slightly higher than that of the EU average (02-2) in the same period

According to the Hungarian Central Statistical Office (KSH) the GDP growth continued

also in 2016 According to ECFIN (2016) the Hungarian GDP growth is forecast to remain

relatively stable in 2016-2017 It is set to decrease to 21 in 2016 as EU funds

disbursement temporarily dips due to a transition between programming periods and the

slack in the economy diminishes The Hungarian industry is characterised by the

dominant role of foreign controlled companies and strong export orientation Foreign

controlled enterprises account for 574 of the total production value in the Hungarian

economy (in 2014) Their share is highest in manufacturing (712) information and

communication (652) and electricity (587) industries The Hungarian government

considers the reduction of the debt rate as one of its main priorities As a result the

budget deficit has been kept under the 3 level since 2012 Between 2013 and 2015

the budget deficit has been further decreased from 26 of the GDP to 20 thus

Hungary has performed better than the EU-28 average Similarly the public debt-to-

GDP ratio has been declining (since its peak at 81 in 2011) on a modest rate to 75

in 2015 It is still relatively high compared to other Central and Eastern European

countries but it can further decrease in the next years according to the European

Commission forecast (EC 2016) The unemployment rate in Hungary has been constantly

decreasing since its peak in 2011 of 112 down to 77 in 2014 and 68 in 2015 In

parallel the activity rate has increased and now it clearly exceeds the pre-financial crisis

level (but is still lagging behind the EU average) The main active policy tool to achieve

this result was the Governmentrsquos public work scheme An important recent trend is the

growing number of people working abroad According to the KSH their share in the total

employed workforce is 27 after growing by 81 since the previous year (KSH

2016)

Productivity growth seems to be very limited in the past few years While the EU-28

average labour productivity continuously improved since 2010 by 45 until 2015

unfortunately the Hungarian case shows almost stagnation ndash with only 16 growth by

2015 - and thus falling behind most EU member countries Besides labour productivity

the total factor productivity remains also on a very low level although showing some

improvement from 2014 to 2015 (from -10 to 02) (OECD 2016b) Looking into the

1httpnkfihgovhupalyazatokhazai-kfi-palyazatok

7

details of labour productivity OECD (2016a) offers more insights Labour productivity

measured as a of GDP per hour worked seems to grow by 245 between 2009 and

2014 but during the same period grew only 018 of GDP per person employed This is

in relation with the governmental efforts to employ more low-skilled workforce through

eg the public work schemes Thus labour productivity contribution to the growth of GDP

per capita has decreased significantly compared to the period 2001-2007 The smaller a

firm is the bigger its gap to the OECD productivity average Manufacturing is the main

contributor to business sector productivity growth and to a lesser extent business

services (mainly trade hotels and transport)

21 Structure of the economy

Although Hungary is still a service-driven economy during the past five years the share

of industry (gross value added of GDP) has grown from 219 to 229 between

2010 and 2015 (without the construction sector) This share is the 7th highest among the

EU member states only after Ireland some other Central and Eastern European

Countries and Germany The growing share of the industry was mainly fuelled by new

vehicle manufacturing capacities which continue to largely determine the countryrsquos

industrial performance in 2016 (as well as in the next years) Manufacturing has an 89

share in industry and while industry has grown by 159 between 2010 and 2015 this

rate was 229 for manufacturing Simultaneously the services sector also has a higher

growth contribution based on increase in tourism retail trade and strengthening the

domestic demand Yet the share of knowledge intensive services ( of total value

added) is above 34 (but shrinking) while the share of high- and medium-high

manufacturing is above 13 (growing since 2010) According to the central Statistical

office besides the vehicle industry the pharmaceutics and machinery are spending the

highest amount on RampD2

22 Business environment

Hungary ranks 41st out of 190 economies in the ldquoDoing business 2017rdquo report produced

by the World Bank3 which is one position higher compared to 20164 Globally Hungary

ranks first () according to ldquotrading across bordersrdquo indicator and has prominent 20th

position for ldquogetting creditrdquo among 190 countries involved in the report Apart from

ldquogetting electricityrdquo (121st) the second worst position is reflected by the indicator

protecting minority investors which ranks 81st (World Bank 2016a)Hungary stands at

75 in the ranking of 190 economies on the ease of starting a business which is a better

position than its neighbouring countriesrsquo ranking ie Austria 111th Czech Republic 67th

Poland 107th In 2015 Hungary made starting a business more difficult by increasing the

paid-in minimum capital requirement In the last few years another major change in

starting a business was the increase of the registration fees for limited liability

companies and the addition of new tax registration at the time of incorporation as well

as and enforcing a requirement for mandatory registration with the Hungarian Chamber

of Commerce and Industryin 2013 (World Bank 2016b)

23 Supply of human resources

According to EIS (2016) the annual growth rate of new doctorate graduates in Hungary

is above the EU-average (36 vs 2) The proportion of doctorate students in science

2 httpstatinfokshhuStatinfohaViewerjsp 3 The rankings are benchmarked to June 2016 and based on the average of each economyrsquos distance to frontier (DTF) scores for the 11 topics included in aggregate ranking 4 Doing business 2016 ranking shown is not last yearrsquos published ranking but a comparable ranking for DB2016 that captures the effects of such factors as data corrections and the changes in methodology

8

and technology fields is stagnating at only 02 of the population aged 20-29 years (EU-

28 average 05 2014) Yet the share of new STEM graduates (as of 1000

population) has increased since 2010 from 11 to 14 by 2014 but remains well

below the EU-28 average of 23 (2014) More positive is the picture of the tertiary

education attainment (as a of the population aged 30-34) which has grown from

261 in 2010 to 343 in 2015 Furthermore Hungary is ranked at the 7th place in the

Digital Economy and Society Index (DESI) 2016 in the share of ICT specialists among

employed individuals (DESI 2016)

3 Main RampI actors

The central governmental actor in the Hungarian RDI system is the National Research

Development and Innovation Office (NKFIH) which is responsible for the realisation of

the governmental policies and the management of the RDI funds (both national and EU

sources) The NKFIH also incorporates the National Research Development and

Innovation (NKFI) Fund - the main domestic financial source for RDI The aim of the high

centralisation of the managing and financing bodies is the better coordination of the

governmental programmes and the financial mechanisms supporting basic research

experimental development and innovation

The Ministry of National Economy and the Ministry of National Development act as

managing authorities in running the Operational Programmes In addition the Ministry of

Human Capacities and the Ministry of Agriculture have responsibilities in research and

development overviewing sectoral activities

A relatively new actor in the Hungarian RDI system from the broader governmental

sphere is a foundation of the Hungarian Central Bank (Magyar Nemzeti Bank MNB) In

2014 the MNB established six foundations under the strong criticism of the parliamentary

opposition and generated active public debates The establishment and the operation of

the foundations are challenged due to their limited transparency

The academic sector in Hungary consists of two main groups of actors a) the Hungarian

Academy of Sciences (MTA) and its research institutions and b) higher education

research units The MTA is the single most significant public research actor representing

712 of the RampD expenditures of the public research sector (KSH 2014) In total the

public research sector spending is comparable to that of the higher education sectorrsquos

research expenditures (HUF 606bn and HUF 595bn in 2014) The MTA and its network

of research institutes are engaged mainly in basic or discovery research Research units

of higher education institutions are focused more on applied research largely due to their

collaboration with the business sphere

In the past few years the business sector has become the main research performer in

Hungary registering a remarkable growth both in RampD expenditures and in the number

of RampD personnel The share of RampD funded by the business has reached 066 of GDP

by 2015 The business RampD expenditure (BERD) has been growing significantly since

2010 (from 069 to 101 of GDP) but it is still only three-quarters of the level of EU-28

average in 2015 The business sector RampD activities are concentrated at and dominated

by few large mainly multinational corporations so the largest share of BERD is

generated by large companies Enterprises with more than 250 employees account for

51 of BERD spent in 2014 while enterprises with 50-249 employees account for 20

and enterprises with 10-49 employees account for 17 It can be seen as a positive

trend that since 2010 the share of the largest companies has slightly declined and that

of the medium and small-sized enterprises (SMEs) has slightly increased There are

specific support programmes (from national and EU sources and through the JEREMIE

programme) for start-up companies but their number and performance is still limited at

national level

9

4 RampI trends

Total GERD in Hungary was euro149233m in 2015 There are three main sources of RampD

funding in Hungary the business sector (euro75119m) the government sector

(euro52315m) and the foreign funding (euro22590m) GERD showed an upward trend with a

rather strong growth rate between 2008 and 2013 At the same time RampD funding by the

government has not increased proportionally5 Contribution from the private sector grew

faster and since 2007 the private sector has been the main contributor to GERD It is

important to notice also that at a first glance funding from the EU appears to be less

important even though structural funds are a major source for RampD funding This might

be due to the accounting system of Hungary that includes structural funds for RampD into

GERD funded by government

Figure 1 Government funding of the total GERD

Data source Eurostat November 2016

41 Public allocation of RampD and RampD expenditure

The public sector is the main recipient of government funded GERD although due to its

nominal stagnation its importance in total financing is decreasing Since 2005 the

business sector has been getting more and more public financing both in nominal and in

real terms becoming the driver of the increase of public support to RampD The RampD tax

incentives are still playing an important element of the domestic support policy The

direct costs of the RampD carried out in their own scope of activities have long been

deductible from the tax base of the corporate tax sole proprietorrsquos income tax local

business tax and innovation contribution For example those paying corporate tax

accounted for HUF288b (euro933m) RampD tax allowance in 2014 (NRP 2016 p21)

Reported by the NRP (2016) there will be a new and potentially significant allowance

introduced in 2016 ie local governments may decide at their discretion that

enterprises can reduce the sum of their local business tax by 10 of the direct costs of

RampD More and more corporations are using the tax relief which was extended to

5 The compounded annual growth rate (CAGR) of the publicly funded GERD for the period 2007-2013 is 47 whereas for the total GERD is 8

10

researchers participating in doctoral programmes in 2014 the estimated number of

doctoral students employed in industry exceeded 850 in 2015 (NRP 2016)

42 Private RampD expenditure

RampD performed by the business sector more than doubled from 04 to 099 of GDP

in the period 2004 to 2014 The increase in particular took place after 2008 and the

economic and financial crisis does not seem to have had a negative impact on overall

business intensity as the total amount of private RampD investments increased significantly

in the 2009 to 2014 period

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture C= manufacture G_N=services)

The biggest funder of business RampD is business itself but government funding and

funding from abroad have since 2010 both doubled their share of funding of business

RampD from 01 to 02 of GDP in 2015 Government funding and funding from abroad

therefore account for about 40 of the funding of business RampD

Manufacturing has increased its RampD intensity from about 04 to 101 of GDP

between 2005 and 2015 and it performed a bit more than half of Hungarian business

RampD in 2014 but services have since 2008 increased their RampD intensity from about

01 to 041 of GDP in 2014 and therefore now perform about one third of business

RampD

Within manufacturing pharmaceuticals is the most important research performer

accounting for some 60 of total manufacturing RampD Gedeon Richter is the only

Hungarian company that was included in the 2011 2012 2013 and 2014 EU Industrial

RampD Investment Scoreboard6 The pharmaceutical company spent HUF 388b (approx

euro130m) on research and development in 2012 which amounts to 119 of its

consolidated sales revenue7 and about 15 of total Hungarian business RampD intensity

Apart from a small drop in 2007 2011 and 2013 pharmaceuticals has seen a steady

increase in business RampD since 2005

The computer electronics and optical equipment sector as well as motor vehicles are the

two other main performers of RampD in manufacturing each accounting for about 20 of

6httpirijrceceuropaeuscoreboard14html 7httpswwwrichterhuen-USresearch-developementPagesResearch-activityaspx

11

manufacturing RampD They have both managed to almost double their RampD intensity since

2005 despite the crisis Motor vehicles have the highest share of high growth companies

with a share of 9-11 depending on the year8

43 Public sector innovation and civil society engagement

Public-sector innovation is defined as a new or significantly improved service

communication method process or organisational method The European Public Sector

Innovation Scoreboard 2013 report concludes that Hungary belongs to the EU countries

with 12 below-average scores out of the 22 total indicators observed Hungary lags

behind especially in government effectiveness regulatory quality increased efficiency of

government services due to the use of ICT online availability of public services share of

service and process innovators that innovate in-house as well as the government

procurement as a driver of business innovation and importance of innovation in

procurement Collaboration in the public sector is a major issue Hungary ranks the last

in terms of the amount of group work to develop innovation (6)9

In 2016 Hungary ranks 46th out of 193 countries in the E-Government Development

Index of the United Nations10 This is 7 positions worse than in 2014 In comparison

Austria ranks 16th Slovenia 21st Croatia 37th the Czech Republic 50th and Slovakia 67th

The E-participation rank (91st out of 193) worsened compared to 2014 (75th position out

of 193) the corresponding Hungarian score is only half of the United Kingdomrsquos

Citizen science initiatives are premature in Hungary as research agendas are generally

set by scientists or the management of research institutes that focus more on

achievement of scientific excellence than addressing societal grand challenges and

knowledge exploitation

5 Innovation challenges

51 Challenge 1 Fostering innovation in domestic enterprises

Description

The Innovation Union Scoreboard 2016 classifies Hungary as a ldquomoderate innovator

The level of innovation activities among the Hungarian companies is generally low

especially that of SMEs Although the total turnover of the business sector stemming

from innovation (97) is close to the EU-28 average (119) only about one-tenth

(106) of the Hungarian SMEs could be considered as innovative companies (EU-28

average is 287) Based on IUS 2016 data only 128 of the SMEs introduce some

kind of product or process innovations in Hungary a slight decrease compared to 2012

(141) that is less than half of the EU-28 average (306) These processes could be

explained by the high concentration of RampD activities in large companies 8 of all

Hungarian research units are responsible for half of the business expenditures on RampD

(KSH 2014) The small domestic firms lack their own funding for RampD and often wait for

public support in order to launch new RampI projects However such funding very often

does not reach the SMEs as they lack the level of tender and administration capacities

required by national and EU funds In general SMEs try to avoid taking risk and rarely

invest in RDI activities from their own pocket

8 If we exclude small companies with less than 10 employees the shares increase significantly but the pattern remains the same 9the highest is that of Swedenrsquos public administration (EPSIS 2013) 10See Hungarian E-government data at httpspublicadministrationunorgegovkben-usDataCountry-Informationid75-Hungary (Date of access 15 August 2016)

12

Policy response

It has been a high priority of the government to boost business RampD in the last decade

through tax incentives and direct measures supporting business RampD During the

planning of the 2014-2020 financial period the government has decided to allocate 60

of total available funding from the Structural Funds for economic development purposes

including non-refundable and refundable resources11 In 2016 research infrastructures

will receive fewer funds than in 2015 which is mainly due to the fade out support of the

ELI laser research laboratory12 Research projects receive less than 2 of the funds

slightly more than the international RDI activities Ongoing programmes such as the

ldquoIPR supportrdquo ldquoInnovation voucherrdquo ldquoInnovation ecosystemrdquo ldquoSmart specialisation

venture capital programmerdquo and ldquoPrototype product technology and service

developmentrdquo clearly focus on supporting research and innovation activities of SMEs and

start-ups

The largest part of domestic funding (37) from NKFIA is allocated to the National

Competitiveness and Excellence Program for enhancing technology transfer and for

Supporting Business RDI activities

Policy assessment

There are several measures in place that build on each other and form a fully-fledged

business RDI support mix Still the risk avoiding attitude both of the governmental

bodies and the SMEs (especially of the domestically owned ones) as well as the

unfavourable framework conditions are obstacles to accelerate the progress of

innovation In addition the lack of innovation experience the insufficient knowledge

base and human resources capacity hamper the development of the innovation process

In addition it depends a lot on the quality of the implementation of RDI measures in

order to achieve the expected outcomes What is more a systemic development of the

entire national innovation system is necessary so that to strengthen and synchronise all

the components of the innovation driving mechanisms

52 Challenge 2 Enhancing the cooperation between science

higher education and business

Description

Supporting cooperation between business and academia has been a high priority of STI

policy in Hungary that resulted in a number of positive developments such as the

growing number of corporate research centres and RampD labs (predominantly run by

multinationals) that work closely with academic partners Several RDI measures

supported the creation of this type of partnerships that usually last until they run out of

public funding Therefore sustainability of these partnerships is a real challenge as they

are not necessarily based on mutual interest of participating parties and lack longer-term

vision or commitment that could be financed with own resources later on The life-cycle

of business-academia partnerships is usually relatively short (1-2 years) and mainly

11 The Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) are of particular importance for STI policy that focus on five major objectives 1) business RDI activities 2) (technology and knowledge) transfer 3) (research) infrastructure 4) research projects and 5) international RDI According to the Annual Development Framework Programme clearly the business RDI activities will receive most of the funds in 2016 (71) among the main objectives of the GINOP sources This objective received the highest growth of available funds compared to 2015 (four times more) 12 In this way the transfer activities became the 2nd largest target with 15 of all funds (but the emphasis is put on the NKFIA sources in 2016 compared to GINOP in the previous year)

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

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statisztikai elemzeacutese 2009-2015 Corruption Research Centre Budapest Budapest

Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

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Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

Commission Joint Research Centre Institute for Prospective Technological Studies

EUR 27863 EN

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2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

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European Commission Brussels

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prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Luxemburg

ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

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by the EVCA Central and Eastern Europe Task Force August 2015

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szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

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() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

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Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 2: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

This publication is a Science for Policy report by the Joint Research Centre (JRC) the European Commissionrsquos science and knowledge service It aims to provide evidence-based scientific support to the European policymaking process The scientific output expressed does not imply nor prejudge policy positions of the European Commission Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use that might be made of this publication

Contact information Email JRC-B7-NETWORKeceuropaeu

JRC Science Hub httpseceuropaeujrc

JRC105927

EUR 28524 EN

PDF ISBN 978-92-79-66732-9 ISSN 1831-9424 doi10276096252

Luxembourg Publications Office of the European Union 2017 copy European Union 2017

The reuse of the document is authorised provided the source is acknowledged and the original meaning or message of the texts are not distorted The European Commission shall not be held liable for any consequences stemming from the reuse

How to cite this report Dőry T Csonka L Slavcheva M RIO Country Report 2016 Hungary EUR 28524 EN doi10276096252

All images copy European Union 2017 except for the ERA Dashboard image on the first page by Niels Meyer licensed under CC BY 20

Research and Innovation Observatory Country Report 2016 Hungary The 2016 series of the RIO Country Report analyses and assesses the development and performance of the national research and innovation system of the EU-28 Member States and related policies It aims at monitoring and evaluating the EU policy implementation as well as facilitating policy learning in the Member States

Print ISBN 978-92-79-69879-8 ISSN 1018-5593 doi102760564889

2

Contents

Foreword 3

Acknowledgements 3

1 Main RampI policy developments in 2016 5

11 Focus on National and Regional Smart Specialization Strategies 5

2 Economic Context 6

21 Structure of the economy 7

22 Business environment 7

23 Supply of human resources 7

3 Main RampI actors 8

4 RampI trends 9

41 Public allocation of RampD and RampD expenditure 9

42 Private RampD expenditure 10

43 Public sector innovation and civil society engagement 11

5 Innovation challenges 11

51 Challenge 1 Fostering innovation in domestic enterprises 11

Description 11

Policy response 12

Policy Assessment 12

52 Challenge 2 Enhancing the cooperation between science higher education and

business 12

Description 12

Policy response 13

Policy Assessment 13

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms 13

Description 13

Policy response 14

Policy Assessment 14

54 Challenge 4 Supplying the RampI system with high-skilled human resources 15

Description 15

Policy response 15

Policy Assessment 15

6 Focus on creating and stimulating markets 16

References 19

Abbreviations 23

Factsheet 25

List of Figures 26

3

Foreword

The report offers an analysis of the RampI system in Hungary for 2016 including relevant

policies and funding with particular focus on topics of critical importance for EU policies

The report identifies the main challenges of the Hungarian research and innovation

system and assesses the policy response It was prepared according to a set of

guidelines for collecting and analysing a range of materials including policy documents

statistics evaluation reports websites etc The quantitative data are whenever

possible comparable across all EU Member State reports Unless specifically referenced

all data used in this report are based on Eurostat statistics available in January 2017

The report content is partly based on the RIO Country Report 2015 (Dőry and Slavcheva

2016)

Acknowledgements

The report has benefited from the expert advice provided by representatives of the

governmental institutions of Hungary

The report has benefited from comments by Fatime Barbara Hegyi and Alexander

Kleibrink from Unit B3 JRC EC

The comments from DG REGIO and DG RTD are also gratefully acknowledged

Authors affiliation

Tibor Dőry Szeacutechenyi Istvaacuten University (Győr Hungary)

Laacuteszloacute Csonka IKU Innovation Research Centre Financial Research Co (Budapest

Hungary)

Milena Slavcheva European Commission Directorate-General Joint Research Centre

Unit B7 Knowledge for Finance Growth amp Innovation (Brussels Belgium)

HIGHLIGHTS

In Hungary the economy grew by 29 in

2015 and is expected to remain relatively

stable in 2016-2017

The budget deficit has been kept under the

3 level since 2012Between 2013 and

2015 the budget deficit was further

decreased from 26 of the GDP to 20

The Hungarian industry is characterised by

the dominant role of foreign controlled

companies and strong export orientation

Foreign controlled enterprises accounted

for 574 of the total production value in

the Hungarian economy in 2014

The unemployment rate in Hungary has

been constantly decreasing since its peak

in 2011 of 112 down to 77 in 2014

and 68 in 2015 The main active policy

tool to achieve this result has been the

Governmentrsquos public work scheme

Although Hungary is still a service-driven

economy during the past five years the

share of industry (gross value added of

GDP) has grown from 219 to 229

between 2010 and 2015 (without the

construction sector)

GERD has shown an upward trend with a

rather strong growth rate between 2008

and 2013 At the same time RampD funding

by the government has not increased

proportionally Contribution from the

private sector grew faster and since 2007

the private sector has been the main

contributor to GERD The structural funds

are a major source for RampD funding

MAIN RampI POLICY CHALLENGES Fostering innovation in domestic

enterprises The level of innovation

activities among the Hungarian

companies is generally low especially

that of SMEs A major reason for that is

the high concentration of RampD activities in

large multinational companies It has

been a high priority of the government to

boost business RampD in the last decade

through tax incentives and direct

measures supporting business RampD

Enhancing the cooperation between

science higher education and

business Supporting cooperation

between business and academia has been

a high priority of the STI policy in

Hungary that resulted in a number of

positive developments such as the

growing number of corporate research

centres and RampD labs As these

partnerships usually last until they run

out of public funding sustainability of the

cooperation is a real challenge

Reinforcing the RampI governance and

transfer mechanisms Frequent

changes in the institutional set-up of the

Hungarian RampI system have led to a

situation in the financing period 2014-

2020 in which RampI governance lacks

experienced employees The recently

established centralisation of all major RampI

resources could potentially speed up and

simplify the access to RDI funding

resources

Supplying the RampI system with high-

skilled human resources Currently the

level of human resources of science and

technology (HRST) is still lagging behind

the EU average Since 2013 the number

of RampD units and the number of RampD

personnel has been decreasing although

differently in the various sectors The

government tries to turn about this trend

and puts a lot of emphasis on the reform

of higher education focusing on more

SampE graduates strengthening the

doctoral studies and forming long-term

basis of the RampD funding of HEIs

MAIN RampI POLICY DEVELOPMENTS IN 2016 Peer review of the Hungarian RampI system H2020 Policy support Facility

Infrastructure development of the higher education organisations

National technology and intellectual property venture capital programme and Smart

specialisation venture capital programme

5

1 Main RampI policy developments in 2016

Peer review of the

Hungarian RampI system

H2020 Policy support

Facility

The peer review panel summarized the experiences in

seven main policy messages 1) Hungary has a vast

science and innovation potential which can be exploited

through reform and sustained increases in public funding

2) RampI vision is needed shared across government and

stakeholders 3) A structured involvement of stakeholders

is needed in overseeing the operations of NKFIH to

increase transparency and responsibility 4) Improved

processes for evaluation and funding of RampI programmes

and projects needed 5) Researcher careers should be

made more attractive 6) More favourable business

environment and 7) Stronger cooperation between public

and private RampI actors

Infrastructure

development of the

higher education

organisations

In addition to GINOP calls published in 2015 focusing on

strengthening research infrastructures and in line with the

higher education strategy a new call EFOP 421 was

announced in November 2016 to support the

infrastructure development of the higher education

organisations with a budget of euro935m from the Human

Resources Operational Programme (EFOP) In order to

support the smart specialisation of Hungarian HEIs the

EFOP 361 call was launched in July 2016 The

programme has a budget of euro645m and aims to improve

the framework conditions of research and innovation

social innovation to reinforce the knowledge base and

transfer mechanisms at HEIs

National technology and

intellectual property

venture capital

programme and Smart

specialisation venture

capital programme

Two large financial instruments were introduced with a

combined budget of euro3226m falling under the category of

refundable measures The first programme will have a

total budget of euro1613M out of which euro645m will be co-

funded by the National Development Bank in addition to

the GINOP resources The primary aim of this fund will be

to ensure complementary funding for those companies

(including start-ups) that will be nurtured by the

incubators

11 Focus on national and regional smart specialisation strategies

Description and timing After consultation with stakeholders and definition of sub-

national (ie county) level specialisations the National Smart Specialisation Strategy

2013-2020 was adopted by government decree 16402014 (XI14) on 14 November

2014 It outlines three national specialisations systems science smart production and

sustainable society The strategy lists six ldquonational sectoral prioritiesrdquo focused on specific

sectors or technological areas two ldquohorizontal prioritiesrdquo (including ICT and inclusive and

sustainable society with viable environment) and a number of ldquosmart technologiesrdquo

(NIH 2014a) The government decree also approved the Hungarian participation in the

Roadmap of the European Strategy Forum on Research Infrastructures (ESFRI) as it was

envisaged in the document ldquoResearch infrastructures in Hungaryrdquo (NIH 2014b)

New developments The implementation of the National Smart Specialisation Strategy

has begun under the supervision of the National Research Development and Innovation

6

Office (NKFIH) The defined specialisations of the S3 strategy are embedded in the calls

of the NKFIH that were published for the new programming period 2014-2020 The

Office aims to ensure the implementation of the S3 strategy through a wide portfolio of

competitive RDI calls The budget of various calls is defined by the Annual Development

Framework that serves as an ldquoimplementation planrdquo of the S3 strategy The operative

portfolio of RDI calls is available on the NKFIH website1

Until the end of September 2016 the NKFIH published RDI calls with a total of euro168bn

(HUF521bn) framework budget out of which euro4435m (HUF1375bn) was allocated to

RDI projects

Outstanding issues Competitive RDI calls in the period 2015-2016 focus on three main

priorities i) support of RDI activities of companies ii) development of RDI infrastructure

and capacities and iii) support of collaboration between academia and business These

new RDI calls consider the S3 priorities in the following ways the RDI calls contain

explicitly S3 priorities within the stated objectives of the calls and the evaluation

process favours those project proposals that are in line with S3 priorities Consequently

the strategic objectives of S3 are realised at the level of the entire RDI portfolio

2 Economic context

In Hungary the economy grew by 31 in 2015 following the 4 growth in 2014 That is

a sign of a solid recovery that started in 2013 with a sustained rate of growth between

2-4 - slightly higher than that of the EU average (02-2) in the same period

According to the Hungarian Central Statistical Office (KSH) the GDP growth continued

also in 2016 According to ECFIN (2016) the Hungarian GDP growth is forecast to remain

relatively stable in 2016-2017 It is set to decrease to 21 in 2016 as EU funds

disbursement temporarily dips due to a transition between programming periods and the

slack in the economy diminishes The Hungarian industry is characterised by the

dominant role of foreign controlled companies and strong export orientation Foreign

controlled enterprises account for 574 of the total production value in the Hungarian

economy (in 2014) Their share is highest in manufacturing (712) information and

communication (652) and electricity (587) industries The Hungarian government

considers the reduction of the debt rate as one of its main priorities As a result the

budget deficit has been kept under the 3 level since 2012 Between 2013 and 2015

the budget deficit has been further decreased from 26 of the GDP to 20 thus

Hungary has performed better than the EU-28 average Similarly the public debt-to-

GDP ratio has been declining (since its peak at 81 in 2011) on a modest rate to 75

in 2015 It is still relatively high compared to other Central and Eastern European

countries but it can further decrease in the next years according to the European

Commission forecast (EC 2016) The unemployment rate in Hungary has been constantly

decreasing since its peak in 2011 of 112 down to 77 in 2014 and 68 in 2015 In

parallel the activity rate has increased and now it clearly exceeds the pre-financial crisis

level (but is still lagging behind the EU average) The main active policy tool to achieve

this result was the Governmentrsquos public work scheme An important recent trend is the

growing number of people working abroad According to the KSH their share in the total

employed workforce is 27 after growing by 81 since the previous year (KSH

2016)

Productivity growth seems to be very limited in the past few years While the EU-28

average labour productivity continuously improved since 2010 by 45 until 2015

unfortunately the Hungarian case shows almost stagnation ndash with only 16 growth by

2015 - and thus falling behind most EU member countries Besides labour productivity

the total factor productivity remains also on a very low level although showing some

improvement from 2014 to 2015 (from -10 to 02) (OECD 2016b) Looking into the

1httpnkfihgovhupalyazatokhazai-kfi-palyazatok

7

details of labour productivity OECD (2016a) offers more insights Labour productivity

measured as a of GDP per hour worked seems to grow by 245 between 2009 and

2014 but during the same period grew only 018 of GDP per person employed This is

in relation with the governmental efforts to employ more low-skilled workforce through

eg the public work schemes Thus labour productivity contribution to the growth of GDP

per capita has decreased significantly compared to the period 2001-2007 The smaller a

firm is the bigger its gap to the OECD productivity average Manufacturing is the main

contributor to business sector productivity growth and to a lesser extent business

services (mainly trade hotels and transport)

21 Structure of the economy

Although Hungary is still a service-driven economy during the past five years the share

of industry (gross value added of GDP) has grown from 219 to 229 between

2010 and 2015 (without the construction sector) This share is the 7th highest among the

EU member states only after Ireland some other Central and Eastern European

Countries and Germany The growing share of the industry was mainly fuelled by new

vehicle manufacturing capacities which continue to largely determine the countryrsquos

industrial performance in 2016 (as well as in the next years) Manufacturing has an 89

share in industry and while industry has grown by 159 between 2010 and 2015 this

rate was 229 for manufacturing Simultaneously the services sector also has a higher

growth contribution based on increase in tourism retail trade and strengthening the

domestic demand Yet the share of knowledge intensive services ( of total value

added) is above 34 (but shrinking) while the share of high- and medium-high

manufacturing is above 13 (growing since 2010) According to the central Statistical

office besides the vehicle industry the pharmaceutics and machinery are spending the

highest amount on RampD2

22 Business environment

Hungary ranks 41st out of 190 economies in the ldquoDoing business 2017rdquo report produced

by the World Bank3 which is one position higher compared to 20164 Globally Hungary

ranks first () according to ldquotrading across bordersrdquo indicator and has prominent 20th

position for ldquogetting creditrdquo among 190 countries involved in the report Apart from

ldquogetting electricityrdquo (121st) the second worst position is reflected by the indicator

protecting minority investors which ranks 81st (World Bank 2016a)Hungary stands at

75 in the ranking of 190 economies on the ease of starting a business which is a better

position than its neighbouring countriesrsquo ranking ie Austria 111th Czech Republic 67th

Poland 107th In 2015 Hungary made starting a business more difficult by increasing the

paid-in minimum capital requirement In the last few years another major change in

starting a business was the increase of the registration fees for limited liability

companies and the addition of new tax registration at the time of incorporation as well

as and enforcing a requirement for mandatory registration with the Hungarian Chamber

of Commerce and Industryin 2013 (World Bank 2016b)

23 Supply of human resources

According to EIS (2016) the annual growth rate of new doctorate graduates in Hungary

is above the EU-average (36 vs 2) The proportion of doctorate students in science

2 httpstatinfokshhuStatinfohaViewerjsp 3 The rankings are benchmarked to June 2016 and based on the average of each economyrsquos distance to frontier (DTF) scores for the 11 topics included in aggregate ranking 4 Doing business 2016 ranking shown is not last yearrsquos published ranking but a comparable ranking for DB2016 that captures the effects of such factors as data corrections and the changes in methodology

8

and technology fields is stagnating at only 02 of the population aged 20-29 years (EU-

28 average 05 2014) Yet the share of new STEM graduates (as of 1000

population) has increased since 2010 from 11 to 14 by 2014 but remains well

below the EU-28 average of 23 (2014) More positive is the picture of the tertiary

education attainment (as a of the population aged 30-34) which has grown from

261 in 2010 to 343 in 2015 Furthermore Hungary is ranked at the 7th place in the

Digital Economy and Society Index (DESI) 2016 in the share of ICT specialists among

employed individuals (DESI 2016)

3 Main RampI actors

The central governmental actor in the Hungarian RDI system is the National Research

Development and Innovation Office (NKFIH) which is responsible for the realisation of

the governmental policies and the management of the RDI funds (both national and EU

sources) The NKFIH also incorporates the National Research Development and

Innovation (NKFI) Fund - the main domestic financial source for RDI The aim of the high

centralisation of the managing and financing bodies is the better coordination of the

governmental programmes and the financial mechanisms supporting basic research

experimental development and innovation

The Ministry of National Economy and the Ministry of National Development act as

managing authorities in running the Operational Programmes In addition the Ministry of

Human Capacities and the Ministry of Agriculture have responsibilities in research and

development overviewing sectoral activities

A relatively new actor in the Hungarian RDI system from the broader governmental

sphere is a foundation of the Hungarian Central Bank (Magyar Nemzeti Bank MNB) In

2014 the MNB established six foundations under the strong criticism of the parliamentary

opposition and generated active public debates The establishment and the operation of

the foundations are challenged due to their limited transparency

The academic sector in Hungary consists of two main groups of actors a) the Hungarian

Academy of Sciences (MTA) and its research institutions and b) higher education

research units The MTA is the single most significant public research actor representing

712 of the RampD expenditures of the public research sector (KSH 2014) In total the

public research sector spending is comparable to that of the higher education sectorrsquos

research expenditures (HUF 606bn and HUF 595bn in 2014) The MTA and its network

of research institutes are engaged mainly in basic or discovery research Research units

of higher education institutions are focused more on applied research largely due to their

collaboration with the business sphere

In the past few years the business sector has become the main research performer in

Hungary registering a remarkable growth both in RampD expenditures and in the number

of RampD personnel The share of RampD funded by the business has reached 066 of GDP

by 2015 The business RampD expenditure (BERD) has been growing significantly since

2010 (from 069 to 101 of GDP) but it is still only three-quarters of the level of EU-28

average in 2015 The business sector RampD activities are concentrated at and dominated

by few large mainly multinational corporations so the largest share of BERD is

generated by large companies Enterprises with more than 250 employees account for

51 of BERD spent in 2014 while enterprises with 50-249 employees account for 20

and enterprises with 10-49 employees account for 17 It can be seen as a positive

trend that since 2010 the share of the largest companies has slightly declined and that

of the medium and small-sized enterprises (SMEs) has slightly increased There are

specific support programmes (from national and EU sources and through the JEREMIE

programme) for start-up companies but their number and performance is still limited at

national level

9

4 RampI trends

Total GERD in Hungary was euro149233m in 2015 There are three main sources of RampD

funding in Hungary the business sector (euro75119m) the government sector

(euro52315m) and the foreign funding (euro22590m) GERD showed an upward trend with a

rather strong growth rate between 2008 and 2013 At the same time RampD funding by the

government has not increased proportionally5 Contribution from the private sector grew

faster and since 2007 the private sector has been the main contributor to GERD It is

important to notice also that at a first glance funding from the EU appears to be less

important even though structural funds are a major source for RampD funding This might

be due to the accounting system of Hungary that includes structural funds for RampD into

GERD funded by government

Figure 1 Government funding of the total GERD

Data source Eurostat November 2016

41 Public allocation of RampD and RampD expenditure

The public sector is the main recipient of government funded GERD although due to its

nominal stagnation its importance in total financing is decreasing Since 2005 the

business sector has been getting more and more public financing both in nominal and in

real terms becoming the driver of the increase of public support to RampD The RampD tax

incentives are still playing an important element of the domestic support policy The

direct costs of the RampD carried out in their own scope of activities have long been

deductible from the tax base of the corporate tax sole proprietorrsquos income tax local

business tax and innovation contribution For example those paying corporate tax

accounted for HUF288b (euro933m) RampD tax allowance in 2014 (NRP 2016 p21)

Reported by the NRP (2016) there will be a new and potentially significant allowance

introduced in 2016 ie local governments may decide at their discretion that

enterprises can reduce the sum of their local business tax by 10 of the direct costs of

RampD More and more corporations are using the tax relief which was extended to

5 The compounded annual growth rate (CAGR) of the publicly funded GERD for the period 2007-2013 is 47 whereas for the total GERD is 8

10

researchers participating in doctoral programmes in 2014 the estimated number of

doctoral students employed in industry exceeded 850 in 2015 (NRP 2016)

42 Private RampD expenditure

RampD performed by the business sector more than doubled from 04 to 099 of GDP

in the period 2004 to 2014 The increase in particular took place after 2008 and the

economic and financial crisis does not seem to have had a negative impact on overall

business intensity as the total amount of private RampD investments increased significantly

in the 2009 to 2014 period

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture C= manufacture G_N=services)

The biggest funder of business RampD is business itself but government funding and

funding from abroad have since 2010 both doubled their share of funding of business

RampD from 01 to 02 of GDP in 2015 Government funding and funding from abroad

therefore account for about 40 of the funding of business RampD

Manufacturing has increased its RampD intensity from about 04 to 101 of GDP

between 2005 and 2015 and it performed a bit more than half of Hungarian business

RampD in 2014 but services have since 2008 increased their RampD intensity from about

01 to 041 of GDP in 2014 and therefore now perform about one third of business

RampD

Within manufacturing pharmaceuticals is the most important research performer

accounting for some 60 of total manufacturing RampD Gedeon Richter is the only

Hungarian company that was included in the 2011 2012 2013 and 2014 EU Industrial

RampD Investment Scoreboard6 The pharmaceutical company spent HUF 388b (approx

euro130m) on research and development in 2012 which amounts to 119 of its

consolidated sales revenue7 and about 15 of total Hungarian business RampD intensity

Apart from a small drop in 2007 2011 and 2013 pharmaceuticals has seen a steady

increase in business RampD since 2005

The computer electronics and optical equipment sector as well as motor vehicles are the

two other main performers of RampD in manufacturing each accounting for about 20 of

6httpirijrceceuropaeuscoreboard14html 7httpswwwrichterhuen-USresearch-developementPagesResearch-activityaspx

11

manufacturing RampD They have both managed to almost double their RampD intensity since

2005 despite the crisis Motor vehicles have the highest share of high growth companies

with a share of 9-11 depending on the year8

43 Public sector innovation and civil society engagement

Public-sector innovation is defined as a new or significantly improved service

communication method process or organisational method The European Public Sector

Innovation Scoreboard 2013 report concludes that Hungary belongs to the EU countries

with 12 below-average scores out of the 22 total indicators observed Hungary lags

behind especially in government effectiveness regulatory quality increased efficiency of

government services due to the use of ICT online availability of public services share of

service and process innovators that innovate in-house as well as the government

procurement as a driver of business innovation and importance of innovation in

procurement Collaboration in the public sector is a major issue Hungary ranks the last

in terms of the amount of group work to develop innovation (6)9

In 2016 Hungary ranks 46th out of 193 countries in the E-Government Development

Index of the United Nations10 This is 7 positions worse than in 2014 In comparison

Austria ranks 16th Slovenia 21st Croatia 37th the Czech Republic 50th and Slovakia 67th

The E-participation rank (91st out of 193) worsened compared to 2014 (75th position out

of 193) the corresponding Hungarian score is only half of the United Kingdomrsquos

Citizen science initiatives are premature in Hungary as research agendas are generally

set by scientists or the management of research institutes that focus more on

achievement of scientific excellence than addressing societal grand challenges and

knowledge exploitation

5 Innovation challenges

51 Challenge 1 Fostering innovation in domestic enterprises

Description

The Innovation Union Scoreboard 2016 classifies Hungary as a ldquomoderate innovator

The level of innovation activities among the Hungarian companies is generally low

especially that of SMEs Although the total turnover of the business sector stemming

from innovation (97) is close to the EU-28 average (119) only about one-tenth

(106) of the Hungarian SMEs could be considered as innovative companies (EU-28

average is 287) Based on IUS 2016 data only 128 of the SMEs introduce some

kind of product or process innovations in Hungary a slight decrease compared to 2012

(141) that is less than half of the EU-28 average (306) These processes could be

explained by the high concentration of RampD activities in large companies 8 of all

Hungarian research units are responsible for half of the business expenditures on RampD

(KSH 2014) The small domestic firms lack their own funding for RampD and often wait for

public support in order to launch new RampI projects However such funding very often

does not reach the SMEs as they lack the level of tender and administration capacities

required by national and EU funds In general SMEs try to avoid taking risk and rarely

invest in RDI activities from their own pocket

8 If we exclude small companies with less than 10 employees the shares increase significantly but the pattern remains the same 9the highest is that of Swedenrsquos public administration (EPSIS 2013) 10See Hungarian E-government data at httpspublicadministrationunorgegovkben-usDataCountry-Informationid75-Hungary (Date of access 15 August 2016)

12

Policy response

It has been a high priority of the government to boost business RampD in the last decade

through tax incentives and direct measures supporting business RampD During the

planning of the 2014-2020 financial period the government has decided to allocate 60

of total available funding from the Structural Funds for economic development purposes

including non-refundable and refundable resources11 In 2016 research infrastructures

will receive fewer funds than in 2015 which is mainly due to the fade out support of the

ELI laser research laboratory12 Research projects receive less than 2 of the funds

slightly more than the international RDI activities Ongoing programmes such as the

ldquoIPR supportrdquo ldquoInnovation voucherrdquo ldquoInnovation ecosystemrdquo ldquoSmart specialisation

venture capital programmerdquo and ldquoPrototype product technology and service

developmentrdquo clearly focus on supporting research and innovation activities of SMEs and

start-ups

The largest part of domestic funding (37) from NKFIA is allocated to the National

Competitiveness and Excellence Program for enhancing technology transfer and for

Supporting Business RDI activities

Policy assessment

There are several measures in place that build on each other and form a fully-fledged

business RDI support mix Still the risk avoiding attitude both of the governmental

bodies and the SMEs (especially of the domestically owned ones) as well as the

unfavourable framework conditions are obstacles to accelerate the progress of

innovation In addition the lack of innovation experience the insufficient knowledge

base and human resources capacity hamper the development of the innovation process

In addition it depends a lot on the quality of the implementation of RDI measures in

order to achieve the expected outcomes What is more a systemic development of the

entire national innovation system is necessary so that to strengthen and synchronise all

the components of the innovation driving mechanisms

52 Challenge 2 Enhancing the cooperation between science

higher education and business

Description

Supporting cooperation between business and academia has been a high priority of STI

policy in Hungary that resulted in a number of positive developments such as the

growing number of corporate research centres and RampD labs (predominantly run by

multinationals) that work closely with academic partners Several RDI measures

supported the creation of this type of partnerships that usually last until they run out of

public funding Therefore sustainability of these partnerships is a real challenge as they

are not necessarily based on mutual interest of participating parties and lack longer-term

vision or commitment that could be financed with own resources later on The life-cycle

of business-academia partnerships is usually relatively short (1-2 years) and mainly

11 The Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) are of particular importance for STI policy that focus on five major objectives 1) business RDI activities 2) (technology and knowledge) transfer 3) (research) infrastructure 4) research projects and 5) international RDI According to the Annual Development Framework Programme clearly the business RDI activities will receive most of the funds in 2016 (71) among the main objectives of the GINOP sources This objective received the highest growth of available funds compared to 2015 (four times more) 12 In this way the transfer activities became the 2nd largest target with 15 of all funds (but the emphasis is put on the NKFIA sources in 2016 compared to GINOP in the previous year)

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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European Commission Brussels

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EC (2016c) Commission Staff Working Document Country Report Hungary 2016

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imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

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ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

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Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

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Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

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KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

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KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

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KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

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innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

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MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

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NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

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NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

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NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

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NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

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NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

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OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

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OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

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Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

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Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

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22

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World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

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23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

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via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

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Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 3: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

2

Contents

Foreword 3

Acknowledgements 3

1 Main RampI policy developments in 2016 5

11 Focus on National and Regional Smart Specialization Strategies 5

2 Economic Context 6

21 Structure of the economy 7

22 Business environment 7

23 Supply of human resources 7

3 Main RampI actors 8

4 RampI trends 9

41 Public allocation of RampD and RampD expenditure 9

42 Private RampD expenditure 10

43 Public sector innovation and civil society engagement 11

5 Innovation challenges 11

51 Challenge 1 Fostering innovation in domestic enterprises 11

Description 11

Policy response 12

Policy Assessment 12

52 Challenge 2 Enhancing the cooperation between science higher education and

business 12

Description 12

Policy response 13

Policy Assessment 13

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms 13

Description 13

Policy response 14

Policy Assessment 14

54 Challenge 4 Supplying the RampI system with high-skilled human resources 15

Description 15

Policy response 15

Policy Assessment 15

6 Focus on creating and stimulating markets 16

References 19

Abbreviations 23

Factsheet 25

List of Figures 26

3

Foreword

The report offers an analysis of the RampI system in Hungary for 2016 including relevant

policies and funding with particular focus on topics of critical importance for EU policies

The report identifies the main challenges of the Hungarian research and innovation

system and assesses the policy response It was prepared according to a set of

guidelines for collecting and analysing a range of materials including policy documents

statistics evaluation reports websites etc The quantitative data are whenever

possible comparable across all EU Member State reports Unless specifically referenced

all data used in this report are based on Eurostat statistics available in January 2017

The report content is partly based on the RIO Country Report 2015 (Dőry and Slavcheva

2016)

Acknowledgements

The report has benefited from the expert advice provided by representatives of the

governmental institutions of Hungary

The report has benefited from comments by Fatime Barbara Hegyi and Alexander

Kleibrink from Unit B3 JRC EC

The comments from DG REGIO and DG RTD are also gratefully acknowledged

Authors affiliation

Tibor Dőry Szeacutechenyi Istvaacuten University (Győr Hungary)

Laacuteszloacute Csonka IKU Innovation Research Centre Financial Research Co (Budapest

Hungary)

Milena Slavcheva European Commission Directorate-General Joint Research Centre

Unit B7 Knowledge for Finance Growth amp Innovation (Brussels Belgium)

HIGHLIGHTS

In Hungary the economy grew by 29 in

2015 and is expected to remain relatively

stable in 2016-2017

The budget deficit has been kept under the

3 level since 2012Between 2013 and

2015 the budget deficit was further

decreased from 26 of the GDP to 20

The Hungarian industry is characterised by

the dominant role of foreign controlled

companies and strong export orientation

Foreign controlled enterprises accounted

for 574 of the total production value in

the Hungarian economy in 2014

The unemployment rate in Hungary has

been constantly decreasing since its peak

in 2011 of 112 down to 77 in 2014

and 68 in 2015 The main active policy

tool to achieve this result has been the

Governmentrsquos public work scheme

Although Hungary is still a service-driven

economy during the past five years the

share of industry (gross value added of

GDP) has grown from 219 to 229

between 2010 and 2015 (without the

construction sector)

GERD has shown an upward trend with a

rather strong growth rate between 2008

and 2013 At the same time RampD funding

by the government has not increased

proportionally Contribution from the

private sector grew faster and since 2007

the private sector has been the main

contributor to GERD The structural funds

are a major source for RampD funding

MAIN RampI POLICY CHALLENGES Fostering innovation in domestic

enterprises The level of innovation

activities among the Hungarian

companies is generally low especially

that of SMEs A major reason for that is

the high concentration of RampD activities in

large multinational companies It has

been a high priority of the government to

boost business RampD in the last decade

through tax incentives and direct

measures supporting business RampD

Enhancing the cooperation between

science higher education and

business Supporting cooperation

between business and academia has been

a high priority of the STI policy in

Hungary that resulted in a number of

positive developments such as the

growing number of corporate research

centres and RampD labs As these

partnerships usually last until they run

out of public funding sustainability of the

cooperation is a real challenge

Reinforcing the RampI governance and

transfer mechanisms Frequent

changes in the institutional set-up of the

Hungarian RampI system have led to a

situation in the financing period 2014-

2020 in which RampI governance lacks

experienced employees The recently

established centralisation of all major RampI

resources could potentially speed up and

simplify the access to RDI funding

resources

Supplying the RampI system with high-

skilled human resources Currently the

level of human resources of science and

technology (HRST) is still lagging behind

the EU average Since 2013 the number

of RampD units and the number of RampD

personnel has been decreasing although

differently in the various sectors The

government tries to turn about this trend

and puts a lot of emphasis on the reform

of higher education focusing on more

SampE graduates strengthening the

doctoral studies and forming long-term

basis of the RampD funding of HEIs

MAIN RampI POLICY DEVELOPMENTS IN 2016 Peer review of the Hungarian RampI system H2020 Policy support Facility

Infrastructure development of the higher education organisations

National technology and intellectual property venture capital programme and Smart

specialisation venture capital programme

5

1 Main RampI policy developments in 2016

Peer review of the

Hungarian RampI system

H2020 Policy support

Facility

The peer review panel summarized the experiences in

seven main policy messages 1) Hungary has a vast

science and innovation potential which can be exploited

through reform and sustained increases in public funding

2) RampI vision is needed shared across government and

stakeholders 3) A structured involvement of stakeholders

is needed in overseeing the operations of NKFIH to

increase transparency and responsibility 4) Improved

processes for evaluation and funding of RampI programmes

and projects needed 5) Researcher careers should be

made more attractive 6) More favourable business

environment and 7) Stronger cooperation between public

and private RampI actors

Infrastructure

development of the

higher education

organisations

In addition to GINOP calls published in 2015 focusing on

strengthening research infrastructures and in line with the

higher education strategy a new call EFOP 421 was

announced in November 2016 to support the

infrastructure development of the higher education

organisations with a budget of euro935m from the Human

Resources Operational Programme (EFOP) In order to

support the smart specialisation of Hungarian HEIs the

EFOP 361 call was launched in July 2016 The

programme has a budget of euro645m and aims to improve

the framework conditions of research and innovation

social innovation to reinforce the knowledge base and

transfer mechanisms at HEIs

National technology and

intellectual property

venture capital

programme and Smart

specialisation venture

capital programme

Two large financial instruments were introduced with a

combined budget of euro3226m falling under the category of

refundable measures The first programme will have a

total budget of euro1613M out of which euro645m will be co-

funded by the National Development Bank in addition to

the GINOP resources The primary aim of this fund will be

to ensure complementary funding for those companies

(including start-ups) that will be nurtured by the

incubators

11 Focus on national and regional smart specialisation strategies

Description and timing After consultation with stakeholders and definition of sub-

national (ie county) level specialisations the National Smart Specialisation Strategy

2013-2020 was adopted by government decree 16402014 (XI14) on 14 November

2014 It outlines three national specialisations systems science smart production and

sustainable society The strategy lists six ldquonational sectoral prioritiesrdquo focused on specific

sectors or technological areas two ldquohorizontal prioritiesrdquo (including ICT and inclusive and

sustainable society with viable environment) and a number of ldquosmart technologiesrdquo

(NIH 2014a) The government decree also approved the Hungarian participation in the

Roadmap of the European Strategy Forum on Research Infrastructures (ESFRI) as it was

envisaged in the document ldquoResearch infrastructures in Hungaryrdquo (NIH 2014b)

New developments The implementation of the National Smart Specialisation Strategy

has begun under the supervision of the National Research Development and Innovation

6

Office (NKFIH) The defined specialisations of the S3 strategy are embedded in the calls

of the NKFIH that were published for the new programming period 2014-2020 The

Office aims to ensure the implementation of the S3 strategy through a wide portfolio of

competitive RDI calls The budget of various calls is defined by the Annual Development

Framework that serves as an ldquoimplementation planrdquo of the S3 strategy The operative

portfolio of RDI calls is available on the NKFIH website1

Until the end of September 2016 the NKFIH published RDI calls with a total of euro168bn

(HUF521bn) framework budget out of which euro4435m (HUF1375bn) was allocated to

RDI projects

Outstanding issues Competitive RDI calls in the period 2015-2016 focus on three main

priorities i) support of RDI activities of companies ii) development of RDI infrastructure

and capacities and iii) support of collaboration between academia and business These

new RDI calls consider the S3 priorities in the following ways the RDI calls contain

explicitly S3 priorities within the stated objectives of the calls and the evaluation

process favours those project proposals that are in line with S3 priorities Consequently

the strategic objectives of S3 are realised at the level of the entire RDI portfolio

2 Economic context

In Hungary the economy grew by 31 in 2015 following the 4 growth in 2014 That is

a sign of a solid recovery that started in 2013 with a sustained rate of growth between

2-4 - slightly higher than that of the EU average (02-2) in the same period

According to the Hungarian Central Statistical Office (KSH) the GDP growth continued

also in 2016 According to ECFIN (2016) the Hungarian GDP growth is forecast to remain

relatively stable in 2016-2017 It is set to decrease to 21 in 2016 as EU funds

disbursement temporarily dips due to a transition between programming periods and the

slack in the economy diminishes The Hungarian industry is characterised by the

dominant role of foreign controlled companies and strong export orientation Foreign

controlled enterprises account for 574 of the total production value in the Hungarian

economy (in 2014) Their share is highest in manufacturing (712) information and

communication (652) and electricity (587) industries The Hungarian government

considers the reduction of the debt rate as one of its main priorities As a result the

budget deficit has been kept under the 3 level since 2012 Between 2013 and 2015

the budget deficit has been further decreased from 26 of the GDP to 20 thus

Hungary has performed better than the EU-28 average Similarly the public debt-to-

GDP ratio has been declining (since its peak at 81 in 2011) on a modest rate to 75

in 2015 It is still relatively high compared to other Central and Eastern European

countries but it can further decrease in the next years according to the European

Commission forecast (EC 2016) The unemployment rate in Hungary has been constantly

decreasing since its peak in 2011 of 112 down to 77 in 2014 and 68 in 2015 In

parallel the activity rate has increased and now it clearly exceeds the pre-financial crisis

level (but is still lagging behind the EU average) The main active policy tool to achieve

this result was the Governmentrsquos public work scheme An important recent trend is the

growing number of people working abroad According to the KSH their share in the total

employed workforce is 27 after growing by 81 since the previous year (KSH

2016)

Productivity growth seems to be very limited in the past few years While the EU-28

average labour productivity continuously improved since 2010 by 45 until 2015

unfortunately the Hungarian case shows almost stagnation ndash with only 16 growth by

2015 - and thus falling behind most EU member countries Besides labour productivity

the total factor productivity remains also on a very low level although showing some

improvement from 2014 to 2015 (from -10 to 02) (OECD 2016b) Looking into the

1httpnkfihgovhupalyazatokhazai-kfi-palyazatok

7

details of labour productivity OECD (2016a) offers more insights Labour productivity

measured as a of GDP per hour worked seems to grow by 245 between 2009 and

2014 but during the same period grew only 018 of GDP per person employed This is

in relation with the governmental efforts to employ more low-skilled workforce through

eg the public work schemes Thus labour productivity contribution to the growth of GDP

per capita has decreased significantly compared to the period 2001-2007 The smaller a

firm is the bigger its gap to the OECD productivity average Manufacturing is the main

contributor to business sector productivity growth and to a lesser extent business

services (mainly trade hotels and transport)

21 Structure of the economy

Although Hungary is still a service-driven economy during the past five years the share

of industry (gross value added of GDP) has grown from 219 to 229 between

2010 and 2015 (without the construction sector) This share is the 7th highest among the

EU member states only after Ireland some other Central and Eastern European

Countries and Germany The growing share of the industry was mainly fuelled by new

vehicle manufacturing capacities which continue to largely determine the countryrsquos

industrial performance in 2016 (as well as in the next years) Manufacturing has an 89

share in industry and while industry has grown by 159 between 2010 and 2015 this

rate was 229 for manufacturing Simultaneously the services sector also has a higher

growth contribution based on increase in tourism retail trade and strengthening the

domestic demand Yet the share of knowledge intensive services ( of total value

added) is above 34 (but shrinking) while the share of high- and medium-high

manufacturing is above 13 (growing since 2010) According to the central Statistical

office besides the vehicle industry the pharmaceutics and machinery are spending the

highest amount on RampD2

22 Business environment

Hungary ranks 41st out of 190 economies in the ldquoDoing business 2017rdquo report produced

by the World Bank3 which is one position higher compared to 20164 Globally Hungary

ranks first () according to ldquotrading across bordersrdquo indicator and has prominent 20th

position for ldquogetting creditrdquo among 190 countries involved in the report Apart from

ldquogetting electricityrdquo (121st) the second worst position is reflected by the indicator

protecting minority investors which ranks 81st (World Bank 2016a)Hungary stands at

75 in the ranking of 190 economies on the ease of starting a business which is a better

position than its neighbouring countriesrsquo ranking ie Austria 111th Czech Republic 67th

Poland 107th In 2015 Hungary made starting a business more difficult by increasing the

paid-in minimum capital requirement In the last few years another major change in

starting a business was the increase of the registration fees for limited liability

companies and the addition of new tax registration at the time of incorporation as well

as and enforcing a requirement for mandatory registration with the Hungarian Chamber

of Commerce and Industryin 2013 (World Bank 2016b)

23 Supply of human resources

According to EIS (2016) the annual growth rate of new doctorate graduates in Hungary

is above the EU-average (36 vs 2) The proportion of doctorate students in science

2 httpstatinfokshhuStatinfohaViewerjsp 3 The rankings are benchmarked to June 2016 and based on the average of each economyrsquos distance to frontier (DTF) scores for the 11 topics included in aggregate ranking 4 Doing business 2016 ranking shown is not last yearrsquos published ranking but a comparable ranking for DB2016 that captures the effects of such factors as data corrections and the changes in methodology

8

and technology fields is stagnating at only 02 of the population aged 20-29 years (EU-

28 average 05 2014) Yet the share of new STEM graduates (as of 1000

population) has increased since 2010 from 11 to 14 by 2014 but remains well

below the EU-28 average of 23 (2014) More positive is the picture of the tertiary

education attainment (as a of the population aged 30-34) which has grown from

261 in 2010 to 343 in 2015 Furthermore Hungary is ranked at the 7th place in the

Digital Economy and Society Index (DESI) 2016 in the share of ICT specialists among

employed individuals (DESI 2016)

3 Main RampI actors

The central governmental actor in the Hungarian RDI system is the National Research

Development and Innovation Office (NKFIH) which is responsible for the realisation of

the governmental policies and the management of the RDI funds (both national and EU

sources) The NKFIH also incorporates the National Research Development and

Innovation (NKFI) Fund - the main domestic financial source for RDI The aim of the high

centralisation of the managing and financing bodies is the better coordination of the

governmental programmes and the financial mechanisms supporting basic research

experimental development and innovation

The Ministry of National Economy and the Ministry of National Development act as

managing authorities in running the Operational Programmes In addition the Ministry of

Human Capacities and the Ministry of Agriculture have responsibilities in research and

development overviewing sectoral activities

A relatively new actor in the Hungarian RDI system from the broader governmental

sphere is a foundation of the Hungarian Central Bank (Magyar Nemzeti Bank MNB) In

2014 the MNB established six foundations under the strong criticism of the parliamentary

opposition and generated active public debates The establishment and the operation of

the foundations are challenged due to their limited transparency

The academic sector in Hungary consists of two main groups of actors a) the Hungarian

Academy of Sciences (MTA) and its research institutions and b) higher education

research units The MTA is the single most significant public research actor representing

712 of the RampD expenditures of the public research sector (KSH 2014) In total the

public research sector spending is comparable to that of the higher education sectorrsquos

research expenditures (HUF 606bn and HUF 595bn in 2014) The MTA and its network

of research institutes are engaged mainly in basic or discovery research Research units

of higher education institutions are focused more on applied research largely due to their

collaboration with the business sphere

In the past few years the business sector has become the main research performer in

Hungary registering a remarkable growth both in RampD expenditures and in the number

of RampD personnel The share of RampD funded by the business has reached 066 of GDP

by 2015 The business RampD expenditure (BERD) has been growing significantly since

2010 (from 069 to 101 of GDP) but it is still only three-quarters of the level of EU-28

average in 2015 The business sector RampD activities are concentrated at and dominated

by few large mainly multinational corporations so the largest share of BERD is

generated by large companies Enterprises with more than 250 employees account for

51 of BERD spent in 2014 while enterprises with 50-249 employees account for 20

and enterprises with 10-49 employees account for 17 It can be seen as a positive

trend that since 2010 the share of the largest companies has slightly declined and that

of the medium and small-sized enterprises (SMEs) has slightly increased There are

specific support programmes (from national and EU sources and through the JEREMIE

programme) for start-up companies but their number and performance is still limited at

national level

9

4 RampI trends

Total GERD in Hungary was euro149233m in 2015 There are three main sources of RampD

funding in Hungary the business sector (euro75119m) the government sector

(euro52315m) and the foreign funding (euro22590m) GERD showed an upward trend with a

rather strong growth rate between 2008 and 2013 At the same time RampD funding by the

government has not increased proportionally5 Contribution from the private sector grew

faster and since 2007 the private sector has been the main contributor to GERD It is

important to notice also that at a first glance funding from the EU appears to be less

important even though structural funds are a major source for RampD funding This might

be due to the accounting system of Hungary that includes structural funds for RampD into

GERD funded by government

Figure 1 Government funding of the total GERD

Data source Eurostat November 2016

41 Public allocation of RampD and RampD expenditure

The public sector is the main recipient of government funded GERD although due to its

nominal stagnation its importance in total financing is decreasing Since 2005 the

business sector has been getting more and more public financing both in nominal and in

real terms becoming the driver of the increase of public support to RampD The RampD tax

incentives are still playing an important element of the domestic support policy The

direct costs of the RampD carried out in their own scope of activities have long been

deductible from the tax base of the corporate tax sole proprietorrsquos income tax local

business tax and innovation contribution For example those paying corporate tax

accounted for HUF288b (euro933m) RampD tax allowance in 2014 (NRP 2016 p21)

Reported by the NRP (2016) there will be a new and potentially significant allowance

introduced in 2016 ie local governments may decide at their discretion that

enterprises can reduce the sum of their local business tax by 10 of the direct costs of

RampD More and more corporations are using the tax relief which was extended to

5 The compounded annual growth rate (CAGR) of the publicly funded GERD for the period 2007-2013 is 47 whereas for the total GERD is 8

10

researchers participating in doctoral programmes in 2014 the estimated number of

doctoral students employed in industry exceeded 850 in 2015 (NRP 2016)

42 Private RampD expenditure

RampD performed by the business sector more than doubled from 04 to 099 of GDP

in the period 2004 to 2014 The increase in particular took place after 2008 and the

economic and financial crisis does not seem to have had a negative impact on overall

business intensity as the total amount of private RampD investments increased significantly

in the 2009 to 2014 period

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture C= manufacture G_N=services)

The biggest funder of business RampD is business itself but government funding and

funding from abroad have since 2010 both doubled their share of funding of business

RampD from 01 to 02 of GDP in 2015 Government funding and funding from abroad

therefore account for about 40 of the funding of business RampD

Manufacturing has increased its RampD intensity from about 04 to 101 of GDP

between 2005 and 2015 and it performed a bit more than half of Hungarian business

RampD in 2014 but services have since 2008 increased their RampD intensity from about

01 to 041 of GDP in 2014 and therefore now perform about one third of business

RampD

Within manufacturing pharmaceuticals is the most important research performer

accounting for some 60 of total manufacturing RampD Gedeon Richter is the only

Hungarian company that was included in the 2011 2012 2013 and 2014 EU Industrial

RampD Investment Scoreboard6 The pharmaceutical company spent HUF 388b (approx

euro130m) on research and development in 2012 which amounts to 119 of its

consolidated sales revenue7 and about 15 of total Hungarian business RampD intensity

Apart from a small drop in 2007 2011 and 2013 pharmaceuticals has seen a steady

increase in business RampD since 2005

The computer electronics and optical equipment sector as well as motor vehicles are the

two other main performers of RampD in manufacturing each accounting for about 20 of

6httpirijrceceuropaeuscoreboard14html 7httpswwwrichterhuen-USresearch-developementPagesResearch-activityaspx

11

manufacturing RampD They have both managed to almost double their RampD intensity since

2005 despite the crisis Motor vehicles have the highest share of high growth companies

with a share of 9-11 depending on the year8

43 Public sector innovation and civil society engagement

Public-sector innovation is defined as a new or significantly improved service

communication method process or organisational method The European Public Sector

Innovation Scoreboard 2013 report concludes that Hungary belongs to the EU countries

with 12 below-average scores out of the 22 total indicators observed Hungary lags

behind especially in government effectiveness regulatory quality increased efficiency of

government services due to the use of ICT online availability of public services share of

service and process innovators that innovate in-house as well as the government

procurement as a driver of business innovation and importance of innovation in

procurement Collaboration in the public sector is a major issue Hungary ranks the last

in terms of the amount of group work to develop innovation (6)9

In 2016 Hungary ranks 46th out of 193 countries in the E-Government Development

Index of the United Nations10 This is 7 positions worse than in 2014 In comparison

Austria ranks 16th Slovenia 21st Croatia 37th the Czech Republic 50th and Slovakia 67th

The E-participation rank (91st out of 193) worsened compared to 2014 (75th position out

of 193) the corresponding Hungarian score is only half of the United Kingdomrsquos

Citizen science initiatives are premature in Hungary as research agendas are generally

set by scientists or the management of research institutes that focus more on

achievement of scientific excellence than addressing societal grand challenges and

knowledge exploitation

5 Innovation challenges

51 Challenge 1 Fostering innovation in domestic enterprises

Description

The Innovation Union Scoreboard 2016 classifies Hungary as a ldquomoderate innovator

The level of innovation activities among the Hungarian companies is generally low

especially that of SMEs Although the total turnover of the business sector stemming

from innovation (97) is close to the EU-28 average (119) only about one-tenth

(106) of the Hungarian SMEs could be considered as innovative companies (EU-28

average is 287) Based on IUS 2016 data only 128 of the SMEs introduce some

kind of product or process innovations in Hungary a slight decrease compared to 2012

(141) that is less than half of the EU-28 average (306) These processes could be

explained by the high concentration of RampD activities in large companies 8 of all

Hungarian research units are responsible for half of the business expenditures on RampD

(KSH 2014) The small domestic firms lack their own funding for RampD and often wait for

public support in order to launch new RampI projects However such funding very often

does not reach the SMEs as they lack the level of tender and administration capacities

required by national and EU funds In general SMEs try to avoid taking risk and rarely

invest in RDI activities from their own pocket

8 If we exclude small companies with less than 10 employees the shares increase significantly but the pattern remains the same 9the highest is that of Swedenrsquos public administration (EPSIS 2013) 10See Hungarian E-government data at httpspublicadministrationunorgegovkben-usDataCountry-Informationid75-Hungary (Date of access 15 August 2016)

12

Policy response

It has been a high priority of the government to boost business RampD in the last decade

through tax incentives and direct measures supporting business RampD During the

planning of the 2014-2020 financial period the government has decided to allocate 60

of total available funding from the Structural Funds for economic development purposes

including non-refundable and refundable resources11 In 2016 research infrastructures

will receive fewer funds than in 2015 which is mainly due to the fade out support of the

ELI laser research laboratory12 Research projects receive less than 2 of the funds

slightly more than the international RDI activities Ongoing programmes such as the

ldquoIPR supportrdquo ldquoInnovation voucherrdquo ldquoInnovation ecosystemrdquo ldquoSmart specialisation

venture capital programmerdquo and ldquoPrototype product technology and service

developmentrdquo clearly focus on supporting research and innovation activities of SMEs and

start-ups

The largest part of domestic funding (37) from NKFIA is allocated to the National

Competitiveness and Excellence Program for enhancing technology transfer and for

Supporting Business RDI activities

Policy assessment

There are several measures in place that build on each other and form a fully-fledged

business RDI support mix Still the risk avoiding attitude both of the governmental

bodies and the SMEs (especially of the domestically owned ones) as well as the

unfavourable framework conditions are obstacles to accelerate the progress of

innovation In addition the lack of innovation experience the insufficient knowledge

base and human resources capacity hamper the development of the innovation process

In addition it depends a lot on the quality of the implementation of RDI measures in

order to achieve the expected outcomes What is more a systemic development of the

entire national innovation system is necessary so that to strengthen and synchronise all

the components of the innovation driving mechanisms

52 Challenge 2 Enhancing the cooperation between science

higher education and business

Description

Supporting cooperation between business and academia has been a high priority of STI

policy in Hungary that resulted in a number of positive developments such as the

growing number of corporate research centres and RampD labs (predominantly run by

multinationals) that work closely with academic partners Several RDI measures

supported the creation of this type of partnerships that usually last until they run out of

public funding Therefore sustainability of these partnerships is a real challenge as they

are not necessarily based on mutual interest of participating parties and lack longer-term

vision or commitment that could be financed with own resources later on The life-cycle

of business-academia partnerships is usually relatively short (1-2 years) and mainly

11 The Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) are of particular importance for STI policy that focus on five major objectives 1) business RDI activities 2) (technology and knowledge) transfer 3) (research) infrastructure 4) research projects and 5) international RDI According to the Annual Development Framework Programme clearly the business RDI activities will receive most of the funds in 2016 (71) among the main objectives of the GINOP sources This objective received the highest growth of available funds compared to 2015 (four times more) 12 In this way the transfer activities became the 2nd largest target with 15 of all funds (but the emphasis is put on the NKFIA sources in 2016 compared to GINOP in the previous year)

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

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httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

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ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

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EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

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20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

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Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

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httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

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httpstatinfokshhuStatinfohaViewerjsp

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(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

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White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

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portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

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OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

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wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

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to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 4: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

3

Foreword

The report offers an analysis of the RampI system in Hungary for 2016 including relevant

policies and funding with particular focus on topics of critical importance for EU policies

The report identifies the main challenges of the Hungarian research and innovation

system and assesses the policy response It was prepared according to a set of

guidelines for collecting and analysing a range of materials including policy documents

statistics evaluation reports websites etc The quantitative data are whenever

possible comparable across all EU Member State reports Unless specifically referenced

all data used in this report are based on Eurostat statistics available in January 2017

The report content is partly based on the RIO Country Report 2015 (Dőry and Slavcheva

2016)

Acknowledgements

The report has benefited from the expert advice provided by representatives of the

governmental institutions of Hungary

The report has benefited from comments by Fatime Barbara Hegyi and Alexander

Kleibrink from Unit B3 JRC EC

The comments from DG REGIO and DG RTD are also gratefully acknowledged

Authors affiliation

Tibor Dőry Szeacutechenyi Istvaacuten University (Győr Hungary)

Laacuteszloacute Csonka IKU Innovation Research Centre Financial Research Co (Budapest

Hungary)

Milena Slavcheva European Commission Directorate-General Joint Research Centre

Unit B7 Knowledge for Finance Growth amp Innovation (Brussels Belgium)

HIGHLIGHTS

In Hungary the economy grew by 29 in

2015 and is expected to remain relatively

stable in 2016-2017

The budget deficit has been kept under the

3 level since 2012Between 2013 and

2015 the budget deficit was further

decreased from 26 of the GDP to 20

The Hungarian industry is characterised by

the dominant role of foreign controlled

companies and strong export orientation

Foreign controlled enterprises accounted

for 574 of the total production value in

the Hungarian economy in 2014

The unemployment rate in Hungary has

been constantly decreasing since its peak

in 2011 of 112 down to 77 in 2014

and 68 in 2015 The main active policy

tool to achieve this result has been the

Governmentrsquos public work scheme

Although Hungary is still a service-driven

economy during the past five years the

share of industry (gross value added of

GDP) has grown from 219 to 229

between 2010 and 2015 (without the

construction sector)

GERD has shown an upward trend with a

rather strong growth rate between 2008

and 2013 At the same time RampD funding

by the government has not increased

proportionally Contribution from the

private sector grew faster and since 2007

the private sector has been the main

contributor to GERD The structural funds

are a major source for RampD funding

MAIN RampI POLICY CHALLENGES Fostering innovation in domestic

enterprises The level of innovation

activities among the Hungarian

companies is generally low especially

that of SMEs A major reason for that is

the high concentration of RampD activities in

large multinational companies It has

been a high priority of the government to

boost business RampD in the last decade

through tax incentives and direct

measures supporting business RampD

Enhancing the cooperation between

science higher education and

business Supporting cooperation

between business and academia has been

a high priority of the STI policy in

Hungary that resulted in a number of

positive developments such as the

growing number of corporate research

centres and RampD labs As these

partnerships usually last until they run

out of public funding sustainability of the

cooperation is a real challenge

Reinforcing the RampI governance and

transfer mechanisms Frequent

changes in the institutional set-up of the

Hungarian RampI system have led to a

situation in the financing period 2014-

2020 in which RampI governance lacks

experienced employees The recently

established centralisation of all major RampI

resources could potentially speed up and

simplify the access to RDI funding

resources

Supplying the RampI system with high-

skilled human resources Currently the

level of human resources of science and

technology (HRST) is still lagging behind

the EU average Since 2013 the number

of RampD units and the number of RampD

personnel has been decreasing although

differently in the various sectors The

government tries to turn about this trend

and puts a lot of emphasis on the reform

of higher education focusing on more

SampE graduates strengthening the

doctoral studies and forming long-term

basis of the RampD funding of HEIs

MAIN RampI POLICY DEVELOPMENTS IN 2016 Peer review of the Hungarian RampI system H2020 Policy support Facility

Infrastructure development of the higher education organisations

National technology and intellectual property venture capital programme and Smart

specialisation venture capital programme

5

1 Main RampI policy developments in 2016

Peer review of the

Hungarian RampI system

H2020 Policy support

Facility

The peer review panel summarized the experiences in

seven main policy messages 1) Hungary has a vast

science and innovation potential which can be exploited

through reform and sustained increases in public funding

2) RampI vision is needed shared across government and

stakeholders 3) A structured involvement of stakeholders

is needed in overseeing the operations of NKFIH to

increase transparency and responsibility 4) Improved

processes for evaluation and funding of RampI programmes

and projects needed 5) Researcher careers should be

made more attractive 6) More favourable business

environment and 7) Stronger cooperation between public

and private RampI actors

Infrastructure

development of the

higher education

organisations

In addition to GINOP calls published in 2015 focusing on

strengthening research infrastructures and in line with the

higher education strategy a new call EFOP 421 was

announced in November 2016 to support the

infrastructure development of the higher education

organisations with a budget of euro935m from the Human

Resources Operational Programme (EFOP) In order to

support the smart specialisation of Hungarian HEIs the

EFOP 361 call was launched in July 2016 The

programme has a budget of euro645m and aims to improve

the framework conditions of research and innovation

social innovation to reinforce the knowledge base and

transfer mechanisms at HEIs

National technology and

intellectual property

venture capital

programme and Smart

specialisation venture

capital programme

Two large financial instruments were introduced with a

combined budget of euro3226m falling under the category of

refundable measures The first programme will have a

total budget of euro1613M out of which euro645m will be co-

funded by the National Development Bank in addition to

the GINOP resources The primary aim of this fund will be

to ensure complementary funding for those companies

(including start-ups) that will be nurtured by the

incubators

11 Focus on national and regional smart specialisation strategies

Description and timing After consultation with stakeholders and definition of sub-

national (ie county) level specialisations the National Smart Specialisation Strategy

2013-2020 was adopted by government decree 16402014 (XI14) on 14 November

2014 It outlines three national specialisations systems science smart production and

sustainable society The strategy lists six ldquonational sectoral prioritiesrdquo focused on specific

sectors or technological areas two ldquohorizontal prioritiesrdquo (including ICT and inclusive and

sustainable society with viable environment) and a number of ldquosmart technologiesrdquo

(NIH 2014a) The government decree also approved the Hungarian participation in the

Roadmap of the European Strategy Forum on Research Infrastructures (ESFRI) as it was

envisaged in the document ldquoResearch infrastructures in Hungaryrdquo (NIH 2014b)

New developments The implementation of the National Smart Specialisation Strategy

has begun under the supervision of the National Research Development and Innovation

6

Office (NKFIH) The defined specialisations of the S3 strategy are embedded in the calls

of the NKFIH that were published for the new programming period 2014-2020 The

Office aims to ensure the implementation of the S3 strategy through a wide portfolio of

competitive RDI calls The budget of various calls is defined by the Annual Development

Framework that serves as an ldquoimplementation planrdquo of the S3 strategy The operative

portfolio of RDI calls is available on the NKFIH website1

Until the end of September 2016 the NKFIH published RDI calls with a total of euro168bn

(HUF521bn) framework budget out of which euro4435m (HUF1375bn) was allocated to

RDI projects

Outstanding issues Competitive RDI calls in the period 2015-2016 focus on three main

priorities i) support of RDI activities of companies ii) development of RDI infrastructure

and capacities and iii) support of collaboration between academia and business These

new RDI calls consider the S3 priorities in the following ways the RDI calls contain

explicitly S3 priorities within the stated objectives of the calls and the evaluation

process favours those project proposals that are in line with S3 priorities Consequently

the strategic objectives of S3 are realised at the level of the entire RDI portfolio

2 Economic context

In Hungary the economy grew by 31 in 2015 following the 4 growth in 2014 That is

a sign of a solid recovery that started in 2013 with a sustained rate of growth between

2-4 - slightly higher than that of the EU average (02-2) in the same period

According to the Hungarian Central Statistical Office (KSH) the GDP growth continued

also in 2016 According to ECFIN (2016) the Hungarian GDP growth is forecast to remain

relatively stable in 2016-2017 It is set to decrease to 21 in 2016 as EU funds

disbursement temporarily dips due to a transition between programming periods and the

slack in the economy diminishes The Hungarian industry is characterised by the

dominant role of foreign controlled companies and strong export orientation Foreign

controlled enterprises account for 574 of the total production value in the Hungarian

economy (in 2014) Their share is highest in manufacturing (712) information and

communication (652) and electricity (587) industries The Hungarian government

considers the reduction of the debt rate as one of its main priorities As a result the

budget deficit has been kept under the 3 level since 2012 Between 2013 and 2015

the budget deficit has been further decreased from 26 of the GDP to 20 thus

Hungary has performed better than the EU-28 average Similarly the public debt-to-

GDP ratio has been declining (since its peak at 81 in 2011) on a modest rate to 75

in 2015 It is still relatively high compared to other Central and Eastern European

countries but it can further decrease in the next years according to the European

Commission forecast (EC 2016) The unemployment rate in Hungary has been constantly

decreasing since its peak in 2011 of 112 down to 77 in 2014 and 68 in 2015 In

parallel the activity rate has increased and now it clearly exceeds the pre-financial crisis

level (but is still lagging behind the EU average) The main active policy tool to achieve

this result was the Governmentrsquos public work scheme An important recent trend is the

growing number of people working abroad According to the KSH their share in the total

employed workforce is 27 after growing by 81 since the previous year (KSH

2016)

Productivity growth seems to be very limited in the past few years While the EU-28

average labour productivity continuously improved since 2010 by 45 until 2015

unfortunately the Hungarian case shows almost stagnation ndash with only 16 growth by

2015 - and thus falling behind most EU member countries Besides labour productivity

the total factor productivity remains also on a very low level although showing some

improvement from 2014 to 2015 (from -10 to 02) (OECD 2016b) Looking into the

1httpnkfihgovhupalyazatokhazai-kfi-palyazatok

7

details of labour productivity OECD (2016a) offers more insights Labour productivity

measured as a of GDP per hour worked seems to grow by 245 between 2009 and

2014 but during the same period grew only 018 of GDP per person employed This is

in relation with the governmental efforts to employ more low-skilled workforce through

eg the public work schemes Thus labour productivity contribution to the growth of GDP

per capita has decreased significantly compared to the period 2001-2007 The smaller a

firm is the bigger its gap to the OECD productivity average Manufacturing is the main

contributor to business sector productivity growth and to a lesser extent business

services (mainly trade hotels and transport)

21 Structure of the economy

Although Hungary is still a service-driven economy during the past five years the share

of industry (gross value added of GDP) has grown from 219 to 229 between

2010 and 2015 (without the construction sector) This share is the 7th highest among the

EU member states only after Ireland some other Central and Eastern European

Countries and Germany The growing share of the industry was mainly fuelled by new

vehicle manufacturing capacities which continue to largely determine the countryrsquos

industrial performance in 2016 (as well as in the next years) Manufacturing has an 89

share in industry and while industry has grown by 159 between 2010 and 2015 this

rate was 229 for manufacturing Simultaneously the services sector also has a higher

growth contribution based on increase in tourism retail trade and strengthening the

domestic demand Yet the share of knowledge intensive services ( of total value

added) is above 34 (but shrinking) while the share of high- and medium-high

manufacturing is above 13 (growing since 2010) According to the central Statistical

office besides the vehicle industry the pharmaceutics and machinery are spending the

highest amount on RampD2

22 Business environment

Hungary ranks 41st out of 190 economies in the ldquoDoing business 2017rdquo report produced

by the World Bank3 which is one position higher compared to 20164 Globally Hungary

ranks first () according to ldquotrading across bordersrdquo indicator and has prominent 20th

position for ldquogetting creditrdquo among 190 countries involved in the report Apart from

ldquogetting electricityrdquo (121st) the second worst position is reflected by the indicator

protecting minority investors which ranks 81st (World Bank 2016a)Hungary stands at

75 in the ranking of 190 economies on the ease of starting a business which is a better

position than its neighbouring countriesrsquo ranking ie Austria 111th Czech Republic 67th

Poland 107th In 2015 Hungary made starting a business more difficult by increasing the

paid-in minimum capital requirement In the last few years another major change in

starting a business was the increase of the registration fees for limited liability

companies and the addition of new tax registration at the time of incorporation as well

as and enforcing a requirement for mandatory registration with the Hungarian Chamber

of Commerce and Industryin 2013 (World Bank 2016b)

23 Supply of human resources

According to EIS (2016) the annual growth rate of new doctorate graduates in Hungary

is above the EU-average (36 vs 2) The proportion of doctorate students in science

2 httpstatinfokshhuStatinfohaViewerjsp 3 The rankings are benchmarked to June 2016 and based on the average of each economyrsquos distance to frontier (DTF) scores for the 11 topics included in aggregate ranking 4 Doing business 2016 ranking shown is not last yearrsquos published ranking but a comparable ranking for DB2016 that captures the effects of such factors as data corrections and the changes in methodology

8

and technology fields is stagnating at only 02 of the population aged 20-29 years (EU-

28 average 05 2014) Yet the share of new STEM graduates (as of 1000

population) has increased since 2010 from 11 to 14 by 2014 but remains well

below the EU-28 average of 23 (2014) More positive is the picture of the tertiary

education attainment (as a of the population aged 30-34) which has grown from

261 in 2010 to 343 in 2015 Furthermore Hungary is ranked at the 7th place in the

Digital Economy and Society Index (DESI) 2016 in the share of ICT specialists among

employed individuals (DESI 2016)

3 Main RampI actors

The central governmental actor in the Hungarian RDI system is the National Research

Development and Innovation Office (NKFIH) which is responsible for the realisation of

the governmental policies and the management of the RDI funds (both national and EU

sources) The NKFIH also incorporates the National Research Development and

Innovation (NKFI) Fund - the main domestic financial source for RDI The aim of the high

centralisation of the managing and financing bodies is the better coordination of the

governmental programmes and the financial mechanisms supporting basic research

experimental development and innovation

The Ministry of National Economy and the Ministry of National Development act as

managing authorities in running the Operational Programmes In addition the Ministry of

Human Capacities and the Ministry of Agriculture have responsibilities in research and

development overviewing sectoral activities

A relatively new actor in the Hungarian RDI system from the broader governmental

sphere is a foundation of the Hungarian Central Bank (Magyar Nemzeti Bank MNB) In

2014 the MNB established six foundations under the strong criticism of the parliamentary

opposition and generated active public debates The establishment and the operation of

the foundations are challenged due to their limited transparency

The academic sector in Hungary consists of two main groups of actors a) the Hungarian

Academy of Sciences (MTA) and its research institutions and b) higher education

research units The MTA is the single most significant public research actor representing

712 of the RampD expenditures of the public research sector (KSH 2014) In total the

public research sector spending is comparable to that of the higher education sectorrsquos

research expenditures (HUF 606bn and HUF 595bn in 2014) The MTA and its network

of research institutes are engaged mainly in basic or discovery research Research units

of higher education institutions are focused more on applied research largely due to their

collaboration with the business sphere

In the past few years the business sector has become the main research performer in

Hungary registering a remarkable growth both in RampD expenditures and in the number

of RampD personnel The share of RampD funded by the business has reached 066 of GDP

by 2015 The business RampD expenditure (BERD) has been growing significantly since

2010 (from 069 to 101 of GDP) but it is still only three-quarters of the level of EU-28

average in 2015 The business sector RampD activities are concentrated at and dominated

by few large mainly multinational corporations so the largest share of BERD is

generated by large companies Enterprises with more than 250 employees account for

51 of BERD spent in 2014 while enterprises with 50-249 employees account for 20

and enterprises with 10-49 employees account for 17 It can be seen as a positive

trend that since 2010 the share of the largest companies has slightly declined and that

of the medium and small-sized enterprises (SMEs) has slightly increased There are

specific support programmes (from national and EU sources and through the JEREMIE

programme) for start-up companies but their number and performance is still limited at

national level

9

4 RampI trends

Total GERD in Hungary was euro149233m in 2015 There are three main sources of RampD

funding in Hungary the business sector (euro75119m) the government sector

(euro52315m) and the foreign funding (euro22590m) GERD showed an upward trend with a

rather strong growth rate between 2008 and 2013 At the same time RampD funding by the

government has not increased proportionally5 Contribution from the private sector grew

faster and since 2007 the private sector has been the main contributor to GERD It is

important to notice also that at a first glance funding from the EU appears to be less

important even though structural funds are a major source for RampD funding This might

be due to the accounting system of Hungary that includes structural funds for RampD into

GERD funded by government

Figure 1 Government funding of the total GERD

Data source Eurostat November 2016

41 Public allocation of RampD and RampD expenditure

The public sector is the main recipient of government funded GERD although due to its

nominal stagnation its importance in total financing is decreasing Since 2005 the

business sector has been getting more and more public financing both in nominal and in

real terms becoming the driver of the increase of public support to RampD The RampD tax

incentives are still playing an important element of the domestic support policy The

direct costs of the RampD carried out in their own scope of activities have long been

deductible from the tax base of the corporate tax sole proprietorrsquos income tax local

business tax and innovation contribution For example those paying corporate tax

accounted for HUF288b (euro933m) RampD tax allowance in 2014 (NRP 2016 p21)

Reported by the NRP (2016) there will be a new and potentially significant allowance

introduced in 2016 ie local governments may decide at their discretion that

enterprises can reduce the sum of their local business tax by 10 of the direct costs of

RampD More and more corporations are using the tax relief which was extended to

5 The compounded annual growth rate (CAGR) of the publicly funded GERD for the period 2007-2013 is 47 whereas for the total GERD is 8

10

researchers participating in doctoral programmes in 2014 the estimated number of

doctoral students employed in industry exceeded 850 in 2015 (NRP 2016)

42 Private RampD expenditure

RampD performed by the business sector more than doubled from 04 to 099 of GDP

in the period 2004 to 2014 The increase in particular took place after 2008 and the

economic and financial crisis does not seem to have had a negative impact on overall

business intensity as the total amount of private RampD investments increased significantly

in the 2009 to 2014 period

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture C= manufacture G_N=services)

The biggest funder of business RampD is business itself but government funding and

funding from abroad have since 2010 both doubled their share of funding of business

RampD from 01 to 02 of GDP in 2015 Government funding and funding from abroad

therefore account for about 40 of the funding of business RampD

Manufacturing has increased its RampD intensity from about 04 to 101 of GDP

between 2005 and 2015 and it performed a bit more than half of Hungarian business

RampD in 2014 but services have since 2008 increased their RampD intensity from about

01 to 041 of GDP in 2014 and therefore now perform about one third of business

RampD

Within manufacturing pharmaceuticals is the most important research performer

accounting for some 60 of total manufacturing RampD Gedeon Richter is the only

Hungarian company that was included in the 2011 2012 2013 and 2014 EU Industrial

RampD Investment Scoreboard6 The pharmaceutical company spent HUF 388b (approx

euro130m) on research and development in 2012 which amounts to 119 of its

consolidated sales revenue7 and about 15 of total Hungarian business RampD intensity

Apart from a small drop in 2007 2011 and 2013 pharmaceuticals has seen a steady

increase in business RampD since 2005

The computer electronics and optical equipment sector as well as motor vehicles are the

two other main performers of RampD in manufacturing each accounting for about 20 of

6httpirijrceceuropaeuscoreboard14html 7httpswwwrichterhuen-USresearch-developementPagesResearch-activityaspx

11

manufacturing RampD They have both managed to almost double their RampD intensity since

2005 despite the crisis Motor vehicles have the highest share of high growth companies

with a share of 9-11 depending on the year8

43 Public sector innovation and civil society engagement

Public-sector innovation is defined as a new or significantly improved service

communication method process or organisational method The European Public Sector

Innovation Scoreboard 2013 report concludes that Hungary belongs to the EU countries

with 12 below-average scores out of the 22 total indicators observed Hungary lags

behind especially in government effectiveness regulatory quality increased efficiency of

government services due to the use of ICT online availability of public services share of

service and process innovators that innovate in-house as well as the government

procurement as a driver of business innovation and importance of innovation in

procurement Collaboration in the public sector is a major issue Hungary ranks the last

in terms of the amount of group work to develop innovation (6)9

In 2016 Hungary ranks 46th out of 193 countries in the E-Government Development

Index of the United Nations10 This is 7 positions worse than in 2014 In comparison

Austria ranks 16th Slovenia 21st Croatia 37th the Czech Republic 50th and Slovakia 67th

The E-participation rank (91st out of 193) worsened compared to 2014 (75th position out

of 193) the corresponding Hungarian score is only half of the United Kingdomrsquos

Citizen science initiatives are premature in Hungary as research agendas are generally

set by scientists or the management of research institutes that focus more on

achievement of scientific excellence than addressing societal grand challenges and

knowledge exploitation

5 Innovation challenges

51 Challenge 1 Fostering innovation in domestic enterprises

Description

The Innovation Union Scoreboard 2016 classifies Hungary as a ldquomoderate innovator

The level of innovation activities among the Hungarian companies is generally low

especially that of SMEs Although the total turnover of the business sector stemming

from innovation (97) is close to the EU-28 average (119) only about one-tenth

(106) of the Hungarian SMEs could be considered as innovative companies (EU-28

average is 287) Based on IUS 2016 data only 128 of the SMEs introduce some

kind of product or process innovations in Hungary a slight decrease compared to 2012

(141) that is less than half of the EU-28 average (306) These processes could be

explained by the high concentration of RampD activities in large companies 8 of all

Hungarian research units are responsible for half of the business expenditures on RampD

(KSH 2014) The small domestic firms lack their own funding for RampD and often wait for

public support in order to launch new RampI projects However such funding very often

does not reach the SMEs as they lack the level of tender and administration capacities

required by national and EU funds In general SMEs try to avoid taking risk and rarely

invest in RDI activities from their own pocket

8 If we exclude small companies with less than 10 employees the shares increase significantly but the pattern remains the same 9the highest is that of Swedenrsquos public administration (EPSIS 2013) 10See Hungarian E-government data at httpspublicadministrationunorgegovkben-usDataCountry-Informationid75-Hungary (Date of access 15 August 2016)

12

Policy response

It has been a high priority of the government to boost business RampD in the last decade

through tax incentives and direct measures supporting business RampD During the

planning of the 2014-2020 financial period the government has decided to allocate 60

of total available funding from the Structural Funds for economic development purposes

including non-refundable and refundable resources11 In 2016 research infrastructures

will receive fewer funds than in 2015 which is mainly due to the fade out support of the

ELI laser research laboratory12 Research projects receive less than 2 of the funds

slightly more than the international RDI activities Ongoing programmes such as the

ldquoIPR supportrdquo ldquoInnovation voucherrdquo ldquoInnovation ecosystemrdquo ldquoSmart specialisation

venture capital programmerdquo and ldquoPrototype product technology and service

developmentrdquo clearly focus on supporting research and innovation activities of SMEs and

start-ups

The largest part of domestic funding (37) from NKFIA is allocated to the National

Competitiveness and Excellence Program for enhancing technology transfer and for

Supporting Business RDI activities

Policy assessment

There are several measures in place that build on each other and form a fully-fledged

business RDI support mix Still the risk avoiding attitude both of the governmental

bodies and the SMEs (especially of the domestically owned ones) as well as the

unfavourable framework conditions are obstacles to accelerate the progress of

innovation In addition the lack of innovation experience the insufficient knowledge

base and human resources capacity hamper the development of the innovation process

In addition it depends a lot on the quality of the implementation of RDI measures in

order to achieve the expected outcomes What is more a systemic development of the

entire national innovation system is necessary so that to strengthen and synchronise all

the components of the innovation driving mechanisms

52 Challenge 2 Enhancing the cooperation between science

higher education and business

Description

Supporting cooperation between business and academia has been a high priority of STI

policy in Hungary that resulted in a number of positive developments such as the

growing number of corporate research centres and RampD labs (predominantly run by

multinationals) that work closely with academic partners Several RDI measures

supported the creation of this type of partnerships that usually last until they run out of

public funding Therefore sustainability of these partnerships is a real challenge as they

are not necessarily based on mutual interest of participating parties and lack longer-term

vision or commitment that could be financed with own resources later on The life-cycle

of business-academia partnerships is usually relatively short (1-2 years) and mainly

11 The Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) are of particular importance for STI policy that focus on five major objectives 1) business RDI activities 2) (technology and knowledge) transfer 3) (research) infrastructure 4) research projects and 5) international RDI According to the Annual Development Framework Programme clearly the business RDI activities will receive most of the funds in 2016 (71) among the main objectives of the GINOP sources This objective received the highest growth of available funds compared to 2015 (four times more) 12 In this way the transfer activities became the 2nd largest target with 15 of all funds (but the emphasis is put on the NKFIA sources in 2016 compared to GINOP in the previous year)

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

Budapest

Convergence programme of Hungary 2016-2020 (2016)

httpeceuropaeueurope2020making-it-happencountry-specific-

recommendationsindex_enhtm

CRCB (2016) Versenyerősseacuteg eacutes korrupcioacutek kockaacutezatok A Magyar koumlzbeszerzeacutesek

statisztikai elemzeacutese 2009-2015 Corruption Research Centre Budapest Budapest

Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

Research Centre Institute for Prospective Technological Studies EUR 27322 EN

Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

Commission Joint Research Centre Institute for Prospective Technological Studies

EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

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European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Luxemburg

ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

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IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

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Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

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KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

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KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

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bull more than one copy or postersmaps

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() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

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Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 5: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

HIGHLIGHTS

In Hungary the economy grew by 29 in

2015 and is expected to remain relatively

stable in 2016-2017

The budget deficit has been kept under the

3 level since 2012Between 2013 and

2015 the budget deficit was further

decreased from 26 of the GDP to 20

The Hungarian industry is characterised by

the dominant role of foreign controlled

companies and strong export orientation

Foreign controlled enterprises accounted

for 574 of the total production value in

the Hungarian economy in 2014

The unemployment rate in Hungary has

been constantly decreasing since its peak

in 2011 of 112 down to 77 in 2014

and 68 in 2015 The main active policy

tool to achieve this result has been the

Governmentrsquos public work scheme

Although Hungary is still a service-driven

economy during the past five years the

share of industry (gross value added of

GDP) has grown from 219 to 229

between 2010 and 2015 (without the

construction sector)

GERD has shown an upward trend with a

rather strong growth rate between 2008

and 2013 At the same time RampD funding

by the government has not increased

proportionally Contribution from the

private sector grew faster and since 2007

the private sector has been the main

contributor to GERD The structural funds

are a major source for RampD funding

MAIN RampI POLICY CHALLENGES Fostering innovation in domestic

enterprises The level of innovation

activities among the Hungarian

companies is generally low especially

that of SMEs A major reason for that is

the high concentration of RampD activities in

large multinational companies It has

been a high priority of the government to

boost business RampD in the last decade

through tax incentives and direct

measures supporting business RampD

Enhancing the cooperation between

science higher education and

business Supporting cooperation

between business and academia has been

a high priority of the STI policy in

Hungary that resulted in a number of

positive developments such as the

growing number of corporate research

centres and RampD labs As these

partnerships usually last until they run

out of public funding sustainability of the

cooperation is a real challenge

Reinforcing the RampI governance and

transfer mechanisms Frequent

changes in the institutional set-up of the

Hungarian RampI system have led to a

situation in the financing period 2014-

2020 in which RampI governance lacks

experienced employees The recently

established centralisation of all major RampI

resources could potentially speed up and

simplify the access to RDI funding

resources

Supplying the RampI system with high-

skilled human resources Currently the

level of human resources of science and

technology (HRST) is still lagging behind

the EU average Since 2013 the number

of RampD units and the number of RampD

personnel has been decreasing although

differently in the various sectors The

government tries to turn about this trend

and puts a lot of emphasis on the reform

of higher education focusing on more

SampE graduates strengthening the

doctoral studies and forming long-term

basis of the RampD funding of HEIs

MAIN RampI POLICY DEVELOPMENTS IN 2016 Peer review of the Hungarian RampI system H2020 Policy support Facility

Infrastructure development of the higher education organisations

National technology and intellectual property venture capital programme and Smart

specialisation venture capital programme

5

1 Main RampI policy developments in 2016

Peer review of the

Hungarian RampI system

H2020 Policy support

Facility

The peer review panel summarized the experiences in

seven main policy messages 1) Hungary has a vast

science and innovation potential which can be exploited

through reform and sustained increases in public funding

2) RampI vision is needed shared across government and

stakeholders 3) A structured involvement of stakeholders

is needed in overseeing the operations of NKFIH to

increase transparency and responsibility 4) Improved

processes for evaluation and funding of RampI programmes

and projects needed 5) Researcher careers should be

made more attractive 6) More favourable business

environment and 7) Stronger cooperation between public

and private RampI actors

Infrastructure

development of the

higher education

organisations

In addition to GINOP calls published in 2015 focusing on

strengthening research infrastructures and in line with the

higher education strategy a new call EFOP 421 was

announced in November 2016 to support the

infrastructure development of the higher education

organisations with a budget of euro935m from the Human

Resources Operational Programme (EFOP) In order to

support the smart specialisation of Hungarian HEIs the

EFOP 361 call was launched in July 2016 The

programme has a budget of euro645m and aims to improve

the framework conditions of research and innovation

social innovation to reinforce the knowledge base and

transfer mechanisms at HEIs

National technology and

intellectual property

venture capital

programme and Smart

specialisation venture

capital programme

Two large financial instruments were introduced with a

combined budget of euro3226m falling under the category of

refundable measures The first programme will have a

total budget of euro1613M out of which euro645m will be co-

funded by the National Development Bank in addition to

the GINOP resources The primary aim of this fund will be

to ensure complementary funding for those companies

(including start-ups) that will be nurtured by the

incubators

11 Focus on national and regional smart specialisation strategies

Description and timing After consultation with stakeholders and definition of sub-

national (ie county) level specialisations the National Smart Specialisation Strategy

2013-2020 was adopted by government decree 16402014 (XI14) on 14 November

2014 It outlines three national specialisations systems science smart production and

sustainable society The strategy lists six ldquonational sectoral prioritiesrdquo focused on specific

sectors or technological areas two ldquohorizontal prioritiesrdquo (including ICT and inclusive and

sustainable society with viable environment) and a number of ldquosmart technologiesrdquo

(NIH 2014a) The government decree also approved the Hungarian participation in the

Roadmap of the European Strategy Forum on Research Infrastructures (ESFRI) as it was

envisaged in the document ldquoResearch infrastructures in Hungaryrdquo (NIH 2014b)

New developments The implementation of the National Smart Specialisation Strategy

has begun under the supervision of the National Research Development and Innovation

6

Office (NKFIH) The defined specialisations of the S3 strategy are embedded in the calls

of the NKFIH that were published for the new programming period 2014-2020 The

Office aims to ensure the implementation of the S3 strategy through a wide portfolio of

competitive RDI calls The budget of various calls is defined by the Annual Development

Framework that serves as an ldquoimplementation planrdquo of the S3 strategy The operative

portfolio of RDI calls is available on the NKFIH website1

Until the end of September 2016 the NKFIH published RDI calls with a total of euro168bn

(HUF521bn) framework budget out of which euro4435m (HUF1375bn) was allocated to

RDI projects

Outstanding issues Competitive RDI calls in the period 2015-2016 focus on three main

priorities i) support of RDI activities of companies ii) development of RDI infrastructure

and capacities and iii) support of collaboration between academia and business These

new RDI calls consider the S3 priorities in the following ways the RDI calls contain

explicitly S3 priorities within the stated objectives of the calls and the evaluation

process favours those project proposals that are in line with S3 priorities Consequently

the strategic objectives of S3 are realised at the level of the entire RDI portfolio

2 Economic context

In Hungary the economy grew by 31 in 2015 following the 4 growth in 2014 That is

a sign of a solid recovery that started in 2013 with a sustained rate of growth between

2-4 - slightly higher than that of the EU average (02-2) in the same period

According to the Hungarian Central Statistical Office (KSH) the GDP growth continued

also in 2016 According to ECFIN (2016) the Hungarian GDP growth is forecast to remain

relatively stable in 2016-2017 It is set to decrease to 21 in 2016 as EU funds

disbursement temporarily dips due to a transition between programming periods and the

slack in the economy diminishes The Hungarian industry is characterised by the

dominant role of foreign controlled companies and strong export orientation Foreign

controlled enterprises account for 574 of the total production value in the Hungarian

economy (in 2014) Their share is highest in manufacturing (712) information and

communication (652) and electricity (587) industries The Hungarian government

considers the reduction of the debt rate as one of its main priorities As a result the

budget deficit has been kept under the 3 level since 2012 Between 2013 and 2015

the budget deficit has been further decreased from 26 of the GDP to 20 thus

Hungary has performed better than the EU-28 average Similarly the public debt-to-

GDP ratio has been declining (since its peak at 81 in 2011) on a modest rate to 75

in 2015 It is still relatively high compared to other Central and Eastern European

countries but it can further decrease in the next years according to the European

Commission forecast (EC 2016) The unemployment rate in Hungary has been constantly

decreasing since its peak in 2011 of 112 down to 77 in 2014 and 68 in 2015 In

parallel the activity rate has increased and now it clearly exceeds the pre-financial crisis

level (but is still lagging behind the EU average) The main active policy tool to achieve

this result was the Governmentrsquos public work scheme An important recent trend is the

growing number of people working abroad According to the KSH their share in the total

employed workforce is 27 after growing by 81 since the previous year (KSH

2016)

Productivity growth seems to be very limited in the past few years While the EU-28

average labour productivity continuously improved since 2010 by 45 until 2015

unfortunately the Hungarian case shows almost stagnation ndash with only 16 growth by

2015 - and thus falling behind most EU member countries Besides labour productivity

the total factor productivity remains also on a very low level although showing some

improvement from 2014 to 2015 (from -10 to 02) (OECD 2016b) Looking into the

1httpnkfihgovhupalyazatokhazai-kfi-palyazatok

7

details of labour productivity OECD (2016a) offers more insights Labour productivity

measured as a of GDP per hour worked seems to grow by 245 between 2009 and

2014 but during the same period grew only 018 of GDP per person employed This is

in relation with the governmental efforts to employ more low-skilled workforce through

eg the public work schemes Thus labour productivity contribution to the growth of GDP

per capita has decreased significantly compared to the period 2001-2007 The smaller a

firm is the bigger its gap to the OECD productivity average Manufacturing is the main

contributor to business sector productivity growth and to a lesser extent business

services (mainly trade hotels and transport)

21 Structure of the economy

Although Hungary is still a service-driven economy during the past five years the share

of industry (gross value added of GDP) has grown from 219 to 229 between

2010 and 2015 (without the construction sector) This share is the 7th highest among the

EU member states only after Ireland some other Central and Eastern European

Countries and Germany The growing share of the industry was mainly fuelled by new

vehicle manufacturing capacities which continue to largely determine the countryrsquos

industrial performance in 2016 (as well as in the next years) Manufacturing has an 89

share in industry and while industry has grown by 159 between 2010 and 2015 this

rate was 229 for manufacturing Simultaneously the services sector also has a higher

growth contribution based on increase in tourism retail trade and strengthening the

domestic demand Yet the share of knowledge intensive services ( of total value

added) is above 34 (but shrinking) while the share of high- and medium-high

manufacturing is above 13 (growing since 2010) According to the central Statistical

office besides the vehicle industry the pharmaceutics and machinery are spending the

highest amount on RampD2

22 Business environment

Hungary ranks 41st out of 190 economies in the ldquoDoing business 2017rdquo report produced

by the World Bank3 which is one position higher compared to 20164 Globally Hungary

ranks first () according to ldquotrading across bordersrdquo indicator and has prominent 20th

position for ldquogetting creditrdquo among 190 countries involved in the report Apart from

ldquogetting electricityrdquo (121st) the second worst position is reflected by the indicator

protecting minority investors which ranks 81st (World Bank 2016a)Hungary stands at

75 in the ranking of 190 economies on the ease of starting a business which is a better

position than its neighbouring countriesrsquo ranking ie Austria 111th Czech Republic 67th

Poland 107th In 2015 Hungary made starting a business more difficult by increasing the

paid-in minimum capital requirement In the last few years another major change in

starting a business was the increase of the registration fees for limited liability

companies and the addition of new tax registration at the time of incorporation as well

as and enforcing a requirement for mandatory registration with the Hungarian Chamber

of Commerce and Industryin 2013 (World Bank 2016b)

23 Supply of human resources

According to EIS (2016) the annual growth rate of new doctorate graduates in Hungary

is above the EU-average (36 vs 2) The proportion of doctorate students in science

2 httpstatinfokshhuStatinfohaViewerjsp 3 The rankings are benchmarked to June 2016 and based on the average of each economyrsquos distance to frontier (DTF) scores for the 11 topics included in aggregate ranking 4 Doing business 2016 ranking shown is not last yearrsquos published ranking but a comparable ranking for DB2016 that captures the effects of such factors as data corrections and the changes in methodology

8

and technology fields is stagnating at only 02 of the population aged 20-29 years (EU-

28 average 05 2014) Yet the share of new STEM graduates (as of 1000

population) has increased since 2010 from 11 to 14 by 2014 but remains well

below the EU-28 average of 23 (2014) More positive is the picture of the tertiary

education attainment (as a of the population aged 30-34) which has grown from

261 in 2010 to 343 in 2015 Furthermore Hungary is ranked at the 7th place in the

Digital Economy and Society Index (DESI) 2016 in the share of ICT specialists among

employed individuals (DESI 2016)

3 Main RampI actors

The central governmental actor in the Hungarian RDI system is the National Research

Development and Innovation Office (NKFIH) which is responsible for the realisation of

the governmental policies and the management of the RDI funds (both national and EU

sources) The NKFIH also incorporates the National Research Development and

Innovation (NKFI) Fund - the main domestic financial source for RDI The aim of the high

centralisation of the managing and financing bodies is the better coordination of the

governmental programmes and the financial mechanisms supporting basic research

experimental development and innovation

The Ministry of National Economy and the Ministry of National Development act as

managing authorities in running the Operational Programmes In addition the Ministry of

Human Capacities and the Ministry of Agriculture have responsibilities in research and

development overviewing sectoral activities

A relatively new actor in the Hungarian RDI system from the broader governmental

sphere is a foundation of the Hungarian Central Bank (Magyar Nemzeti Bank MNB) In

2014 the MNB established six foundations under the strong criticism of the parliamentary

opposition and generated active public debates The establishment and the operation of

the foundations are challenged due to their limited transparency

The academic sector in Hungary consists of two main groups of actors a) the Hungarian

Academy of Sciences (MTA) and its research institutions and b) higher education

research units The MTA is the single most significant public research actor representing

712 of the RampD expenditures of the public research sector (KSH 2014) In total the

public research sector spending is comparable to that of the higher education sectorrsquos

research expenditures (HUF 606bn and HUF 595bn in 2014) The MTA and its network

of research institutes are engaged mainly in basic or discovery research Research units

of higher education institutions are focused more on applied research largely due to their

collaboration with the business sphere

In the past few years the business sector has become the main research performer in

Hungary registering a remarkable growth both in RampD expenditures and in the number

of RampD personnel The share of RampD funded by the business has reached 066 of GDP

by 2015 The business RampD expenditure (BERD) has been growing significantly since

2010 (from 069 to 101 of GDP) but it is still only three-quarters of the level of EU-28

average in 2015 The business sector RampD activities are concentrated at and dominated

by few large mainly multinational corporations so the largest share of BERD is

generated by large companies Enterprises with more than 250 employees account for

51 of BERD spent in 2014 while enterprises with 50-249 employees account for 20

and enterprises with 10-49 employees account for 17 It can be seen as a positive

trend that since 2010 the share of the largest companies has slightly declined and that

of the medium and small-sized enterprises (SMEs) has slightly increased There are

specific support programmes (from national and EU sources and through the JEREMIE

programme) for start-up companies but their number and performance is still limited at

national level

9

4 RampI trends

Total GERD in Hungary was euro149233m in 2015 There are three main sources of RampD

funding in Hungary the business sector (euro75119m) the government sector

(euro52315m) and the foreign funding (euro22590m) GERD showed an upward trend with a

rather strong growth rate between 2008 and 2013 At the same time RampD funding by the

government has not increased proportionally5 Contribution from the private sector grew

faster and since 2007 the private sector has been the main contributor to GERD It is

important to notice also that at a first glance funding from the EU appears to be less

important even though structural funds are a major source for RampD funding This might

be due to the accounting system of Hungary that includes structural funds for RampD into

GERD funded by government

Figure 1 Government funding of the total GERD

Data source Eurostat November 2016

41 Public allocation of RampD and RampD expenditure

The public sector is the main recipient of government funded GERD although due to its

nominal stagnation its importance in total financing is decreasing Since 2005 the

business sector has been getting more and more public financing both in nominal and in

real terms becoming the driver of the increase of public support to RampD The RampD tax

incentives are still playing an important element of the domestic support policy The

direct costs of the RampD carried out in their own scope of activities have long been

deductible from the tax base of the corporate tax sole proprietorrsquos income tax local

business tax and innovation contribution For example those paying corporate tax

accounted for HUF288b (euro933m) RampD tax allowance in 2014 (NRP 2016 p21)

Reported by the NRP (2016) there will be a new and potentially significant allowance

introduced in 2016 ie local governments may decide at their discretion that

enterprises can reduce the sum of their local business tax by 10 of the direct costs of

RampD More and more corporations are using the tax relief which was extended to

5 The compounded annual growth rate (CAGR) of the publicly funded GERD for the period 2007-2013 is 47 whereas for the total GERD is 8

10

researchers participating in doctoral programmes in 2014 the estimated number of

doctoral students employed in industry exceeded 850 in 2015 (NRP 2016)

42 Private RampD expenditure

RampD performed by the business sector more than doubled from 04 to 099 of GDP

in the period 2004 to 2014 The increase in particular took place after 2008 and the

economic and financial crisis does not seem to have had a negative impact on overall

business intensity as the total amount of private RampD investments increased significantly

in the 2009 to 2014 period

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture C= manufacture G_N=services)

The biggest funder of business RampD is business itself but government funding and

funding from abroad have since 2010 both doubled their share of funding of business

RampD from 01 to 02 of GDP in 2015 Government funding and funding from abroad

therefore account for about 40 of the funding of business RampD

Manufacturing has increased its RampD intensity from about 04 to 101 of GDP

between 2005 and 2015 and it performed a bit more than half of Hungarian business

RampD in 2014 but services have since 2008 increased their RampD intensity from about

01 to 041 of GDP in 2014 and therefore now perform about one third of business

RampD

Within manufacturing pharmaceuticals is the most important research performer

accounting for some 60 of total manufacturing RampD Gedeon Richter is the only

Hungarian company that was included in the 2011 2012 2013 and 2014 EU Industrial

RampD Investment Scoreboard6 The pharmaceutical company spent HUF 388b (approx

euro130m) on research and development in 2012 which amounts to 119 of its

consolidated sales revenue7 and about 15 of total Hungarian business RampD intensity

Apart from a small drop in 2007 2011 and 2013 pharmaceuticals has seen a steady

increase in business RampD since 2005

The computer electronics and optical equipment sector as well as motor vehicles are the

two other main performers of RampD in manufacturing each accounting for about 20 of

6httpirijrceceuropaeuscoreboard14html 7httpswwwrichterhuen-USresearch-developementPagesResearch-activityaspx

11

manufacturing RampD They have both managed to almost double their RampD intensity since

2005 despite the crisis Motor vehicles have the highest share of high growth companies

with a share of 9-11 depending on the year8

43 Public sector innovation and civil society engagement

Public-sector innovation is defined as a new or significantly improved service

communication method process or organisational method The European Public Sector

Innovation Scoreboard 2013 report concludes that Hungary belongs to the EU countries

with 12 below-average scores out of the 22 total indicators observed Hungary lags

behind especially in government effectiveness regulatory quality increased efficiency of

government services due to the use of ICT online availability of public services share of

service and process innovators that innovate in-house as well as the government

procurement as a driver of business innovation and importance of innovation in

procurement Collaboration in the public sector is a major issue Hungary ranks the last

in terms of the amount of group work to develop innovation (6)9

In 2016 Hungary ranks 46th out of 193 countries in the E-Government Development

Index of the United Nations10 This is 7 positions worse than in 2014 In comparison

Austria ranks 16th Slovenia 21st Croatia 37th the Czech Republic 50th and Slovakia 67th

The E-participation rank (91st out of 193) worsened compared to 2014 (75th position out

of 193) the corresponding Hungarian score is only half of the United Kingdomrsquos

Citizen science initiatives are premature in Hungary as research agendas are generally

set by scientists or the management of research institutes that focus more on

achievement of scientific excellence than addressing societal grand challenges and

knowledge exploitation

5 Innovation challenges

51 Challenge 1 Fostering innovation in domestic enterprises

Description

The Innovation Union Scoreboard 2016 classifies Hungary as a ldquomoderate innovator

The level of innovation activities among the Hungarian companies is generally low

especially that of SMEs Although the total turnover of the business sector stemming

from innovation (97) is close to the EU-28 average (119) only about one-tenth

(106) of the Hungarian SMEs could be considered as innovative companies (EU-28

average is 287) Based on IUS 2016 data only 128 of the SMEs introduce some

kind of product or process innovations in Hungary a slight decrease compared to 2012

(141) that is less than half of the EU-28 average (306) These processes could be

explained by the high concentration of RampD activities in large companies 8 of all

Hungarian research units are responsible for half of the business expenditures on RampD

(KSH 2014) The small domestic firms lack their own funding for RampD and often wait for

public support in order to launch new RampI projects However such funding very often

does not reach the SMEs as they lack the level of tender and administration capacities

required by national and EU funds In general SMEs try to avoid taking risk and rarely

invest in RDI activities from their own pocket

8 If we exclude small companies with less than 10 employees the shares increase significantly but the pattern remains the same 9the highest is that of Swedenrsquos public administration (EPSIS 2013) 10See Hungarian E-government data at httpspublicadministrationunorgegovkben-usDataCountry-Informationid75-Hungary (Date of access 15 August 2016)

12

Policy response

It has been a high priority of the government to boost business RampD in the last decade

through tax incentives and direct measures supporting business RampD During the

planning of the 2014-2020 financial period the government has decided to allocate 60

of total available funding from the Structural Funds for economic development purposes

including non-refundable and refundable resources11 In 2016 research infrastructures

will receive fewer funds than in 2015 which is mainly due to the fade out support of the

ELI laser research laboratory12 Research projects receive less than 2 of the funds

slightly more than the international RDI activities Ongoing programmes such as the

ldquoIPR supportrdquo ldquoInnovation voucherrdquo ldquoInnovation ecosystemrdquo ldquoSmart specialisation

venture capital programmerdquo and ldquoPrototype product technology and service

developmentrdquo clearly focus on supporting research and innovation activities of SMEs and

start-ups

The largest part of domestic funding (37) from NKFIA is allocated to the National

Competitiveness and Excellence Program for enhancing technology transfer and for

Supporting Business RDI activities

Policy assessment

There are several measures in place that build on each other and form a fully-fledged

business RDI support mix Still the risk avoiding attitude both of the governmental

bodies and the SMEs (especially of the domestically owned ones) as well as the

unfavourable framework conditions are obstacles to accelerate the progress of

innovation In addition the lack of innovation experience the insufficient knowledge

base and human resources capacity hamper the development of the innovation process

In addition it depends a lot on the quality of the implementation of RDI measures in

order to achieve the expected outcomes What is more a systemic development of the

entire national innovation system is necessary so that to strengthen and synchronise all

the components of the innovation driving mechanisms

52 Challenge 2 Enhancing the cooperation between science

higher education and business

Description

Supporting cooperation between business and academia has been a high priority of STI

policy in Hungary that resulted in a number of positive developments such as the

growing number of corporate research centres and RampD labs (predominantly run by

multinationals) that work closely with academic partners Several RDI measures

supported the creation of this type of partnerships that usually last until they run out of

public funding Therefore sustainability of these partnerships is a real challenge as they

are not necessarily based on mutual interest of participating parties and lack longer-term

vision or commitment that could be financed with own resources later on The life-cycle

of business-academia partnerships is usually relatively short (1-2 years) and mainly

11 The Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) are of particular importance for STI policy that focus on five major objectives 1) business RDI activities 2) (technology and knowledge) transfer 3) (research) infrastructure 4) research projects and 5) international RDI According to the Annual Development Framework Programme clearly the business RDI activities will receive most of the funds in 2016 (71) among the main objectives of the GINOP sources This objective received the highest growth of available funds compared to 2015 (four times more) 12 In this way the transfer activities became the 2nd largest target with 15 of all funds (but the emphasis is put on the NKFIA sources in 2016 compared to GINOP in the previous year)

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

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Convergence programme of Hungary 2016-2020 (2016)

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recommendationsindex_enhtm

CRCB (2016) Versenyerősseacuteg eacutes korrupcioacutek kockaacutezatok A Magyar koumlzbeszerzeacutesek

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Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

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Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

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EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

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EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

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European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

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ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

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IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

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Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

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KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

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httpstatinfokshhuStatinfohaViewerjsp

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innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

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via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

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() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

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Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 6: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

5

1 Main RampI policy developments in 2016

Peer review of the

Hungarian RampI system

H2020 Policy support

Facility

The peer review panel summarized the experiences in

seven main policy messages 1) Hungary has a vast

science and innovation potential which can be exploited

through reform and sustained increases in public funding

2) RampI vision is needed shared across government and

stakeholders 3) A structured involvement of stakeholders

is needed in overseeing the operations of NKFIH to

increase transparency and responsibility 4) Improved

processes for evaluation and funding of RampI programmes

and projects needed 5) Researcher careers should be

made more attractive 6) More favourable business

environment and 7) Stronger cooperation between public

and private RampI actors

Infrastructure

development of the

higher education

organisations

In addition to GINOP calls published in 2015 focusing on

strengthening research infrastructures and in line with the

higher education strategy a new call EFOP 421 was

announced in November 2016 to support the

infrastructure development of the higher education

organisations with a budget of euro935m from the Human

Resources Operational Programme (EFOP) In order to

support the smart specialisation of Hungarian HEIs the

EFOP 361 call was launched in July 2016 The

programme has a budget of euro645m and aims to improve

the framework conditions of research and innovation

social innovation to reinforce the knowledge base and

transfer mechanisms at HEIs

National technology and

intellectual property

venture capital

programme and Smart

specialisation venture

capital programme

Two large financial instruments were introduced with a

combined budget of euro3226m falling under the category of

refundable measures The first programme will have a

total budget of euro1613M out of which euro645m will be co-

funded by the National Development Bank in addition to

the GINOP resources The primary aim of this fund will be

to ensure complementary funding for those companies

(including start-ups) that will be nurtured by the

incubators

11 Focus on national and regional smart specialisation strategies

Description and timing After consultation with stakeholders and definition of sub-

national (ie county) level specialisations the National Smart Specialisation Strategy

2013-2020 was adopted by government decree 16402014 (XI14) on 14 November

2014 It outlines three national specialisations systems science smart production and

sustainable society The strategy lists six ldquonational sectoral prioritiesrdquo focused on specific

sectors or technological areas two ldquohorizontal prioritiesrdquo (including ICT and inclusive and

sustainable society with viable environment) and a number of ldquosmart technologiesrdquo

(NIH 2014a) The government decree also approved the Hungarian participation in the

Roadmap of the European Strategy Forum on Research Infrastructures (ESFRI) as it was

envisaged in the document ldquoResearch infrastructures in Hungaryrdquo (NIH 2014b)

New developments The implementation of the National Smart Specialisation Strategy

has begun under the supervision of the National Research Development and Innovation

6

Office (NKFIH) The defined specialisations of the S3 strategy are embedded in the calls

of the NKFIH that were published for the new programming period 2014-2020 The

Office aims to ensure the implementation of the S3 strategy through a wide portfolio of

competitive RDI calls The budget of various calls is defined by the Annual Development

Framework that serves as an ldquoimplementation planrdquo of the S3 strategy The operative

portfolio of RDI calls is available on the NKFIH website1

Until the end of September 2016 the NKFIH published RDI calls with a total of euro168bn

(HUF521bn) framework budget out of which euro4435m (HUF1375bn) was allocated to

RDI projects

Outstanding issues Competitive RDI calls in the period 2015-2016 focus on three main

priorities i) support of RDI activities of companies ii) development of RDI infrastructure

and capacities and iii) support of collaboration between academia and business These

new RDI calls consider the S3 priorities in the following ways the RDI calls contain

explicitly S3 priorities within the stated objectives of the calls and the evaluation

process favours those project proposals that are in line with S3 priorities Consequently

the strategic objectives of S3 are realised at the level of the entire RDI portfolio

2 Economic context

In Hungary the economy grew by 31 in 2015 following the 4 growth in 2014 That is

a sign of a solid recovery that started in 2013 with a sustained rate of growth between

2-4 - slightly higher than that of the EU average (02-2) in the same period

According to the Hungarian Central Statistical Office (KSH) the GDP growth continued

also in 2016 According to ECFIN (2016) the Hungarian GDP growth is forecast to remain

relatively stable in 2016-2017 It is set to decrease to 21 in 2016 as EU funds

disbursement temporarily dips due to a transition between programming periods and the

slack in the economy diminishes The Hungarian industry is characterised by the

dominant role of foreign controlled companies and strong export orientation Foreign

controlled enterprises account for 574 of the total production value in the Hungarian

economy (in 2014) Their share is highest in manufacturing (712) information and

communication (652) and electricity (587) industries The Hungarian government

considers the reduction of the debt rate as one of its main priorities As a result the

budget deficit has been kept under the 3 level since 2012 Between 2013 and 2015

the budget deficit has been further decreased from 26 of the GDP to 20 thus

Hungary has performed better than the EU-28 average Similarly the public debt-to-

GDP ratio has been declining (since its peak at 81 in 2011) on a modest rate to 75

in 2015 It is still relatively high compared to other Central and Eastern European

countries but it can further decrease in the next years according to the European

Commission forecast (EC 2016) The unemployment rate in Hungary has been constantly

decreasing since its peak in 2011 of 112 down to 77 in 2014 and 68 in 2015 In

parallel the activity rate has increased and now it clearly exceeds the pre-financial crisis

level (but is still lagging behind the EU average) The main active policy tool to achieve

this result was the Governmentrsquos public work scheme An important recent trend is the

growing number of people working abroad According to the KSH their share in the total

employed workforce is 27 after growing by 81 since the previous year (KSH

2016)

Productivity growth seems to be very limited in the past few years While the EU-28

average labour productivity continuously improved since 2010 by 45 until 2015

unfortunately the Hungarian case shows almost stagnation ndash with only 16 growth by

2015 - and thus falling behind most EU member countries Besides labour productivity

the total factor productivity remains also on a very low level although showing some

improvement from 2014 to 2015 (from -10 to 02) (OECD 2016b) Looking into the

1httpnkfihgovhupalyazatokhazai-kfi-palyazatok

7

details of labour productivity OECD (2016a) offers more insights Labour productivity

measured as a of GDP per hour worked seems to grow by 245 between 2009 and

2014 but during the same period grew only 018 of GDP per person employed This is

in relation with the governmental efforts to employ more low-skilled workforce through

eg the public work schemes Thus labour productivity contribution to the growth of GDP

per capita has decreased significantly compared to the period 2001-2007 The smaller a

firm is the bigger its gap to the OECD productivity average Manufacturing is the main

contributor to business sector productivity growth and to a lesser extent business

services (mainly trade hotels and transport)

21 Structure of the economy

Although Hungary is still a service-driven economy during the past five years the share

of industry (gross value added of GDP) has grown from 219 to 229 between

2010 and 2015 (without the construction sector) This share is the 7th highest among the

EU member states only after Ireland some other Central and Eastern European

Countries and Germany The growing share of the industry was mainly fuelled by new

vehicle manufacturing capacities which continue to largely determine the countryrsquos

industrial performance in 2016 (as well as in the next years) Manufacturing has an 89

share in industry and while industry has grown by 159 between 2010 and 2015 this

rate was 229 for manufacturing Simultaneously the services sector also has a higher

growth contribution based on increase in tourism retail trade and strengthening the

domestic demand Yet the share of knowledge intensive services ( of total value

added) is above 34 (but shrinking) while the share of high- and medium-high

manufacturing is above 13 (growing since 2010) According to the central Statistical

office besides the vehicle industry the pharmaceutics and machinery are spending the

highest amount on RampD2

22 Business environment

Hungary ranks 41st out of 190 economies in the ldquoDoing business 2017rdquo report produced

by the World Bank3 which is one position higher compared to 20164 Globally Hungary

ranks first () according to ldquotrading across bordersrdquo indicator and has prominent 20th

position for ldquogetting creditrdquo among 190 countries involved in the report Apart from

ldquogetting electricityrdquo (121st) the second worst position is reflected by the indicator

protecting minority investors which ranks 81st (World Bank 2016a)Hungary stands at

75 in the ranking of 190 economies on the ease of starting a business which is a better

position than its neighbouring countriesrsquo ranking ie Austria 111th Czech Republic 67th

Poland 107th In 2015 Hungary made starting a business more difficult by increasing the

paid-in minimum capital requirement In the last few years another major change in

starting a business was the increase of the registration fees for limited liability

companies and the addition of new tax registration at the time of incorporation as well

as and enforcing a requirement for mandatory registration with the Hungarian Chamber

of Commerce and Industryin 2013 (World Bank 2016b)

23 Supply of human resources

According to EIS (2016) the annual growth rate of new doctorate graduates in Hungary

is above the EU-average (36 vs 2) The proportion of doctorate students in science

2 httpstatinfokshhuStatinfohaViewerjsp 3 The rankings are benchmarked to June 2016 and based on the average of each economyrsquos distance to frontier (DTF) scores for the 11 topics included in aggregate ranking 4 Doing business 2016 ranking shown is not last yearrsquos published ranking but a comparable ranking for DB2016 that captures the effects of such factors as data corrections and the changes in methodology

8

and technology fields is stagnating at only 02 of the population aged 20-29 years (EU-

28 average 05 2014) Yet the share of new STEM graduates (as of 1000

population) has increased since 2010 from 11 to 14 by 2014 but remains well

below the EU-28 average of 23 (2014) More positive is the picture of the tertiary

education attainment (as a of the population aged 30-34) which has grown from

261 in 2010 to 343 in 2015 Furthermore Hungary is ranked at the 7th place in the

Digital Economy and Society Index (DESI) 2016 in the share of ICT specialists among

employed individuals (DESI 2016)

3 Main RampI actors

The central governmental actor in the Hungarian RDI system is the National Research

Development and Innovation Office (NKFIH) which is responsible for the realisation of

the governmental policies and the management of the RDI funds (both national and EU

sources) The NKFIH also incorporates the National Research Development and

Innovation (NKFI) Fund - the main domestic financial source for RDI The aim of the high

centralisation of the managing and financing bodies is the better coordination of the

governmental programmes and the financial mechanisms supporting basic research

experimental development and innovation

The Ministry of National Economy and the Ministry of National Development act as

managing authorities in running the Operational Programmes In addition the Ministry of

Human Capacities and the Ministry of Agriculture have responsibilities in research and

development overviewing sectoral activities

A relatively new actor in the Hungarian RDI system from the broader governmental

sphere is a foundation of the Hungarian Central Bank (Magyar Nemzeti Bank MNB) In

2014 the MNB established six foundations under the strong criticism of the parliamentary

opposition and generated active public debates The establishment and the operation of

the foundations are challenged due to their limited transparency

The academic sector in Hungary consists of two main groups of actors a) the Hungarian

Academy of Sciences (MTA) and its research institutions and b) higher education

research units The MTA is the single most significant public research actor representing

712 of the RampD expenditures of the public research sector (KSH 2014) In total the

public research sector spending is comparable to that of the higher education sectorrsquos

research expenditures (HUF 606bn and HUF 595bn in 2014) The MTA and its network

of research institutes are engaged mainly in basic or discovery research Research units

of higher education institutions are focused more on applied research largely due to their

collaboration with the business sphere

In the past few years the business sector has become the main research performer in

Hungary registering a remarkable growth both in RampD expenditures and in the number

of RampD personnel The share of RampD funded by the business has reached 066 of GDP

by 2015 The business RampD expenditure (BERD) has been growing significantly since

2010 (from 069 to 101 of GDP) but it is still only three-quarters of the level of EU-28

average in 2015 The business sector RampD activities are concentrated at and dominated

by few large mainly multinational corporations so the largest share of BERD is

generated by large companies Enterprises with more than 250 employees account for

51 of BERD spent in 2014 while enterprises with 50-249 employees account for 20

and enterprises with 10-49 employees account for 17 It can be seen as a positive

trend that since 2010 the share of the largest companies has slightly declined and that

of the medium and small-sized enterprises (SMEs) has slightly increased There are

specific support programmes (from national and EU sources and through the JEREMIE

programme) for start-up companies but their number and performance is still limited at

national level

9

4 RampI trends

Total GERD in Hungary was euro149233m in 2015 There are three main sources of RampD

funding in Hungary the business sector (euro75119m) the government sector

(euro52315m) and the foreign funding (euro22590m) GERD showed an upward trend with a

rather strong growth rate between 2008 and 2013 At the same time RampD funding by the

government has not increased proportionally5 Contribution from the private sector grew

faster and since 2007 the private sector has been the main contributor to GERD It is

important to notice also that at a first glance funding from the EU appears to be less

important even though structural funds are a major source for RampD funding This might

be due to the accounting system of Hungary that includes structural funds for RampD into

GERD funded by government

Figure 1 Government funding of the total GERD

Data source Eurostat November 2016

41 Public allocation of RampD and RampD expenditure

The public sector is the main recipient of government funded GERD although due to its

nominal stagnation its importance in total financing is decreasing Since 2005 the

business sector has been getting more and more public financing both in nominal and in

real terms becoming the driver of the increase of public support to RampD The RampD tax

incentives are still playing an important element of the domestic support policy The

direct costs of the RampD carried out in their own scope of activities have long been

deductible from the tax base of the corporate tax sole proprietorrsquos income tax local

business tax and innovation contribution For example those paying corporate tax

accounted for HUF288b (euro933m) RampD tax allowance in 2014 (NRP 2016 p21)

Reported by the NRP (2016) there will be a new and potentially significant allowance

introduced in 2016 ie local governments may decide at their discretion that

enterprises can reduce the sum of their local business tax by 10 of the direct costs of

RampD More and more corporations are using the tax relief which was extended to

5 The compounded annual growth rate (CAGR) of the publicly funded GERD for the period 2007-2013 is 47 whereas for the total GERD is 8

10

researchers participating in doctoral programmes in 2014 the estimated number of

doctoral students employed in industry exceeded 850 in 2015 (NRP 2016)

42 Private RampD expenditure

RampD performed by the business sector more than doubled from 04 to 099 of GDP

in the period 2004 to 2014 The increase in particular took place after 2008 and the

economic and financial crisis does not seem to have had a negative impact on overall

business intensity as the total amount of private RampD investments increased significantly

in the 2009 to 2014 period

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture C= manufacture G_N=services)

The biggest funder of business RampD is business itself but government funding and

funding from abroad have since 2010 both doubled their share of funding of business

RampD from 01 to 02 of GDP in 2015 Government funding and funding from abroad

therefore account for about 40 of the funding of business RampD

Manufacturing has increased its RampD intensity from about 04 to 101 of GDP

between 2005 and 2015 and it performed a bit more than half of Hungarian business

RampD in 2014 but services have since 2008 increased their RampD intensity from about

01 to 041 of GDP in 2014 and therefore now perform about one third of business

RampD

Within manufacturing pharmaceuticals is the most important research performer

accounting for some 60 of total manufacturing RampD Gedeon Richter is the only

Hungarian company that was included in the 2011 2012 2013 and 2014 EU Industrial

RampD Investment Scoreboard6 The pharmaceutical company spent HUF 388b (approx

euro130m) on research and development in 2012 which amounts to 119 of its

consolidated sales revenue7 and about 15 of total Hungarian business RampD intensity

Apart from a small drop in 2007 2011 and 2013 pharmaceuticals has seen a steady

increase in business RampD since 2005

The computer electronics and optical equipment sector as well as motor vehicles are the

two other main performers of RampD in manufacturing each accounting for about 20 of

6httpirijrceceuropaeuscoreboard14html 7httpswwwrichterhuen-USresearch-developementPagesResearch-activityaspx

11

manufacturing RampD They have both managed to almost double their RampD intensity since

2005 despite the crisis Motor vehicles have the highest share of high growth companies

with a share of 9-11 depending on the year8

43 Public sector innovation and civil society engagement

Public-sector innovation is defined as a new or significantly improved service

communication method process or organisational method The European Public Sector

Innovation Scoreboard 2013 report concludes that Hungary belongs to the EU countries

with 12 below-average scores out of the 22 total indicators observed Hungary lags

behind especially in government effectiveness regulatory quality increased efficiency of

government services due to the use of ICT online availability of public services share of

service and process innovators that innovate in-house as well as the government

procurement as a driver of business innovation and importance of innovation in

procurement Collaboration in the public sector is a major issue Hungary ranks the last

in terms of the amount of group work to develop innovation (6)9

In 2016 Hungary ranks 46th out of 193 countries in the E-Government Development

Index of the United Nations10 This is 7 positions worse than in 2014 In comparison

Austria ranks 16th Slovenia 21st Croatia 37th the Czech Republic 50th and Slovakia 67th

The E-participation rank (91st out of 193) worsened compared to 2014 (75th position out

of 193) the corresponding Hungarian score is only half of the United Kingdomrsquos

Citizen science initiatives are premature in Hungary as research agendas are generally

set by scientists or the management of research institutes that focus more on

achievement of scientific excellence than addressing societal grand challenges and

knowledge exploitation

5 Innovation challenges

51 Challenge 1 Fostering innovation in domestic enterprises

Description

The Innovation Union Scoreboard 2016 classifies Hungary as a ldquomoderate innovator

The level of innovation activities among the Hungarian companies is generally low

especially that of SMEs Although the total turnover of the business sector stemming

from innovation (97) is close to the EU-28 average (119) only about one-tenth

(106) of the Hungarian SMEs could be considered as innovative companies (EU-28

average is 287) Based on IUS 2016 data only 128 of the SMEs introduce some

kind of product or process innovations in Hungary a slight decrease compared to 2012

(141) that is less than half of the EU-28 average (306) These processes could be

explained by the high concentration of RampD activities in large companies 8 of all

Hungarian research units are responsible for half of the business expenditures on RampD

(KSH 2014) The small domestic firms lack their own funding for RampD and often wait for

public support in order to launch new RampI projects However such funding very often

does not reach the SMEs as they lack the level of tender and administration capacities

required by national and EU funds In general SMEs try to avoid taking risk and rarely

invest in RDI activities from their own pocket

8 If we exclude small companies with less than 10 employees the shares increase significantly but the pattern remains the same 9the highest is that of Swedenrsquos public administration (EPSIS 2013) 10See Hungarian E-government data at httpspublicadministrationunorgegovkben-usDataCountry-Informationid75-Hungary (Date of access 15 August 2016)

12

Policy response

It has been a high priority of the government to boost business RampD in the last decade

through tax incentives and direct measures supporting business RampD During the

planning of the 2014-2020 financial period the government has decided to allocate 60

of total available funding from the Structural Funds for economic development purposes

including non-refundable and refundable resources11 In 2016 research infrastructures

will receive fewer funds than in 2015 which is mainly due to the fade out support of the

ELI laser research laboratory12 Research projects receive less than 2 of the funds

slightly more than the international RDI activities Ongoing programmes such as the

ldquoIPR supportrdquo ldquoInnovation voucherrdquo ldquoInnovation ecosystemrdquo ldquoSmart specialisation

venture capital programmerdquo and ldquoPrototype product technology and service

developmentrdquo clearly focus on supporting research and innovation activities of SMEs and

start-ups

The largest part of domestic funding (37) from NKFIA is allocated to the National

Competitiveness and Excellence Program for enhancing technology transfer and for

Supporting Business RDI activities

Policy assessment

There are several measures in place that build on each other and form a fully-fledged

business RDI support mix Still the risk avoiding attitude both of the governmental

bodies and the SMEs (especially of the domestically owned ones) as well as the

unfavourable framework conditions are obstacles to accelerate the progress of

innovation In addition the lack of innovation experience the insufficient knowledge

base and human resources capacity hamper the development of the innovation process

In addition it depends a lot on the quality of the implementation of RDI measures in

order to achieve the expected outcomes What is more a systemic development of the

entire national innovation system is necessary so that to strengthen and synchronise all

the components of the innovation driving mechanisms

52 Challenge 2 Enhancing the cooperation between science

higher education and business

Description

Supporting cooperation between business and academia has been a high priority of STI

policy in Hungary that resulted in a number of positive developments such as the

growing number of corporate research centres and RampD labs (predominantly run by

multinationals) that work closely with academic partners Several RDI measures

supported the creation of this type of partnerships that usually last until they run out of

public funding Therefore sustainability of these partnerships is a real challenge as they

are not necessarily based on mutual interest of participating parties and lack longer-term

vision or commitment that could be financed with own resources later on The life-cycle

of business-academia partnerships is usually relatively short (1-2 years) and mainly

11 The Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) are of particular importance for STI policy that focus on five major objectives 1) business RDI activities 2) (technology and knowledge) transfer 3) (research) infrastructure 4) research projects and 5) international RDI According to the Annual Development Framework Programme clearly the business RDI activities will receive most of the funds in 2016 (71) among the main objectives of the GINOP sources This objective received the highest growth of available funds compared to 2015 (four times more) 12 In this way the transfer activities became the 2nd largest target with 15 of all funds (but the emphasis is put on the NKFIA sources in 2016 compared to GINOP in the previous year)

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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European Commission Brussels

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EC (2016c) Commission Staff Working Document Country Report Hungary 2016

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imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

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httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

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European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

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by the EVCA Central and Eastern Europe Task Force August 2015

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szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

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Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

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KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

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NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

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NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

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NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

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Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

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22

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International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

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() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

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you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 7: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

6

Office (NKFIH) The defined specialisations of the S3 strategy are embedded in the calls

of the NKFIH that were published for the new programming period 2014-2020 The

Office aims to ensure the implementation of the S3 strategy through a wide portfolio of

competitive RDI calls The budget of various calls is defined by the Annual Development

Framework that serves as an ldquoimplementation planrdquo of the S3 strategy The operative

portfolio of RDI calls is available on the NKFIH website1

Until the end of September 2016 the NKFIH published RDI calls with a total of euro168bn

(HUF521bn) framework budget out of which euro4435m (HUF1375bn) was allocated to

RDI projects

Outstanding issues Competitive RDI calls in the period 2015-2016 focus on three main

priorities i) support of RDI activities of companies ii) development of RDI infrastructure

and capacities and iii) support of collaboration between academia and business These

new RDI calls consider the S3 priorities in the following ways the RDI calls contain

explicitly S3 priorities within the stated objectives of the calls and the evaluation

process favours those project proposals that are in line with S3 priorities Consequently

the strategic objectives of S3 are realised at the level of the entire RDI portfolio

2 Economic context

In Hungary the economy grew by 31 in 2015 following the 4 growth in 2014 That is

a sign of a solid recovery that started in 2013 with a sustained rate of growth between

2-4 - slightly higher than that of the EU average (02-2) in the same period

According to the Hungarian Central Statistical Office (KSH) the GDP growth continued

also in 2016 According to ECFIN (2016) the Hungarian GDP growth is forecast to remain

relatively stable in 2016-2017 It is set to decrease to 21 in 2016 as EU funds

disbursement temporarily dips due to a transition between programming periods and the

slack in the economy diminishes The Hungarian industry is characterised by the

dominant role of foreign controlled companies and strong export orientation Foreign

controlled enterprises account for 574 of the total production value in the Hungarian

economy (in 2014) Their share is highest in manufacturing (712) information and

communication (652) and electricity (587) industries The Hungarian government

considers the reduction of the debt rate as one of its main priorities As a result the

budget deficit has been kept under the 3 level since 2012 Between 2013 and 2015

the budget deficit has been further decreased from 26 of the GDP to 20 thus

Hungary has performed better than the EU-28 average Similarly the public debt-to-

GDP ratio has been declining (since its peak at 81 in 2011) on a modest rate to 75

in 2015 It is still relatively high compared to other Central and Eastern European

countries but it can further decrease in the next years according to the European

Commission forecast (EC 2016) The unemployment rate in Hungary has been constantly

decreasing since its peak in 2011 of 112 down to 77 in 2014 and 68 in 2015 In

parallel the activity rate has increased and now it clearly exceeds the pre-financial crisis

level (but is still lagging behind the EU average) The main active policy tool to achieve

this result was the Governmentrsquos public work scheme An important recent trend is the

growing number of people working abroad According to the KSH their share in the total

employed workforce is 27 after growing by 81 since the previous year (KSH

2016)

Productivity growth seems to be very limited in the past few years While the EU-28

average labour productivity continuously improved since 2010 by 45 until 2015

unfortunately the Hungarian case shows almost stagnation ndash with only 16 growth by

2015 - and thus falling behind most EU member countries Besides labour productivity

the total factor productivity remains also on a very low level although showing some

improvement from 2014 to 2015 (from -10 to 02) (OECD 2016b) Looking into the

1httpnkfihgovhupalyazatokhazai-kfi-palyazatok

7

details of labour productivity OECD (2016a) offers more insights Labour productivity

measured as a of GDP per hour worked seems to grow by 245 between 2009 and

2014 but during the same period grew only 018 of GDP per person employed This is

in relation with the governmental efforts to employ more low-skilled workforce through

eg the public work schemes Thus labour productivity contribution to the growth of GDP

per capita has decreased significantly compared to the period 2001-2007 The smaller a

firm is the bigger its gap to the OECD productivity average Manufacturing is the main

contributor to business sector productivity growth and to a lesser extent business

services (mainly trade hotels and transport)

21 Structure of the economy

Although Hungary is still a service-driven economy during the past five years the share

of industry (gross value added of GDP) has grown from 219 to 229 between

2010 and 2015 (without the construction sector) This share is the 7th highest among the

EU member states only after Ireland some other Central and Eastern European

Countries and Germany The growing share of the industry was mainly fuelled by new

vehicle manufacturing capacities which continue to largely determine the countryrsquos

industrial performance in 2016 (as well as in the next years) Manufacturing has an 89

share in industry and while industry has grown by 159 between 2010 and 2015 this

rate was 229 for manufacturing Simultaneously the services sector also has a higher

growth contribution based on increase in tourism retail trade and strengthening the

domestic demand Yet the share of knowledge intensive services ( of total value

added) is above 34 (but shrinking) while the share of high- and medium-high

manufacturing is above 13 (growing since 2010) According to the central Statistical

office besides the vehicle industry the pharmaceutics and machinery are spending the

highest amount on RampD2

22 Business environment

Hungary ranks 41st out of 190 economies in the ldquoDoing business 2017rdquo report produced

by the World Bank3 which is one position higher compared to 20164 Globally Hungary

ranks first () according to ldquotrading across bordersrdquo indicator and has prominent 20th

position for ldquogetting creditrdquo among 190 countries involved in the report Apart from

ldquogetting electricityrdquo (121st) the second worst position is reflected by the indicator

protecting minority investors which ranks 81st (World Bank 2016a)Hungary stands at

75 in the ranking of 190 economies on the ease of starting a business which is a better

position than its neighbouring countriesrsquo ranking ie Austria 111th Czech Republic 67th

Poland 107th In 2015 Hungary made starting a business more difficult by increasing the

paid-in minimum capital requirement In the last few years another major change in

starting a business was the increase of the registration fees for limited liability

companies and the addition of new tax registration at the time of incorporation as well

as and enforcing a requirement for mandatory registration with the Hungarian Chamber

of Commerce and Industryin 2013 (World Bank 2016b)

23 Supply of human resources

According to EIS (2016) the annual growth rate of new doctorate graduates in Hungary

is above the EU-average (36 vs 2) The proportion of doctorate students in science

2 httpstatinfokshhuStatinfohaViewerjsp 3 The rankings are benchmarked to June 2016 and based on the average of each economyrsquos distance to frontier (DTF) scores for the 11 topics included in aggregate ranking 4 Doing business 2016 ranking shown is not last yearrsquos published ranking but a comparable ranking for DB2016 that captures the effects of such factors as data corrections and the changes in methodology

8

and technology fields is stagnating at only 02 of the population aged 20-29 years (EU-

28 average 05 2014) Yet the share of new STEM graduates (as of 1000

population) has increased since 2010 from 11 to 14 by 2014 but remains well

below the EU-28 average of 23 (2014) More positive is the picture of the tertiary

education attainment (as a of the population aged 30-34) which has grown from

261 in 2010 to 343 in 2015 Furthermore Hungary is ranked at the 7th place in the

Digital Economy and Society Index (DESI) 2016 in the share of ICT specialists among

employed individuals (DESI 2016)

3 Main RampI actors

The central governmental actor in the Hungarian RDI system is the National Research

Development and Innovation Office (NKFIH) which is responsible for the realisation of

the governmental policies and the management of the RDI funds (both national and EU

sources) The NKFIH also incorporates the National Research Development and

Innovation (NKFI) Fund - the main domestic financial source for RDI The aim of the high

centralisation of the managing and financing bodies is the better coordination of the

governmental programmes and the financial mechanisms supporting basic research

experimental development and innovation

The Ministry of National Economy and the Ministry of National Development act as

managing authorities in running the Operational Programmes In addition the Ministry of

Human Capacities and the Ministry of Agriculture have responsibilities in research and

development overviewing sectoral activities

A relatively new actor in the Hungarian RDI system from the broader governmental

sphere is a foundation of the Hungarian Central Bank (Magyar Nemzeti Bank MNB) In

2014 the MNB established six foundations under the strong criticism of the parliamentary

opposition and generated active public debates The establishment and the operation of

the foundations are challenged due to their limited transparency

The academic sector in Hungary consists of two main groups of actors a) the Hungarian

Academy of Sciences (MTA) and its research institutions and b) higher education

research units The MTA is the single most significant public research actor representing

712 of the RampD expenditures of the public research sector (KSH 2014) In total the

public research sector spending is comparable to that of the higher education sectorrsquos

research expenditures (HUF 606bn and HUF 595bn in 2014) The MTA and its network

of research institutes are engaged mainly in basic or discovery research Research units

of higher education institutions are focused more on applied research largely due to their

collaboration with the business sphere

In the past few years the business sector has become the main research performer in

Hungary registering a remarkable growth both in RampD expenditures and in the number

of RampD personnel The share of RampD funded by the business has reached 066 of GDP

by 2015 The business RampD expenditure (BERD) has been growing significantly since

2010 (from 069 to 101 of GDP) but it is still only three-quarters of the level of EU-28

average in 2015 The business sector RampD activities are concentrated at and dominated

by few large mainly multinational corporations so the largest share of BERD is

generated by large companies Enterprises with more than 250 employees account for

51 of BERD spent in 2014 while enterprises with 50-249 employees account for 20

and enterprises with 10-49 employees account for 17 It can be seen as a positive

trend that since 2010 the share of the largest companies has slightly declined and that

of the medium and small-sized enterprises (SMEs) has slightly increased There are

specific support programmes (from national and EU sources and through the JEREMIE

programme) for start-up companies but their number and performance is still limited at

national level

9

4 RampI trends

Total GERD in Hungary was euro149233m in 2015 There are three main sources of RampD

funding in Hungary the business sector (euro75119m) the government sector

(euro52315m) and the foreign funding (euro22590m) GERD showed an upward trend with a

rather strong growth rate between 2008 and 2013 At the same time RampD funding by the

government has not increased proportionally5 Contribution from the private sector grew

faster and since 2007 the private sector has been the main contributor to GERD It is

important to notice also that at a first glance funding from the EU appears to be less

important even though structural funds are a major source for RampD funding This might

be due to the accounting system of Hungary that includes structural funds for RampD into

GERD funded by government

Figure 1 Government funding of the total GERD

Data source Eurostat November 2016

41 Public allocation of RampD and RampD expenditure

The public sector is the main recipient of government funded GERD although due to its

nominal stagnation its importance in total financing is decreasing Since 2005 the

business sector has been getting more and more public financing both in nominal and in

real terms becoming the driver of the increase of public support to RampD The RampD tax

incentives are still playing an important element of the domestic support policy The

direct costs of the RampD carried out in their own scope of activities have long been

deductible from the tax base of the corporate tax sole proprietorrsquos income tax local

business tax and innovation contribution For example those paying corporate tax

accounted for HUF288b (euro933m) RampD tax allowance in 2014 (NRP 2016 p21)

Reported by the NRP (2016) there will be a new and potentially significant allowance

introduced in 2016 ie local governments may decide at their discretion that

enterprises can reduce the sum of their local business tax by 10 of the direct costs of

RampD More and more corporations are using the tax relief which was extended to

5 The compounded annual growth rate (CAGR) of the publicly funded GERD for the period 2007-2013 is 47 whereas for the total GERD is 8

10

researchers participating in doctoral programmes in 2014 the estimated number of

doctoral students employed in industry exceeded 850 in 2015 (NRP 2016)

42 Private RampD expenditure

RampD performed by the business sector more than doubled from 04 to 099 of GDP

in the period 2004 to 2014 The increase in particular took place after 2008 and the

economic and financial crisis does not seem to have had a negative impact on overall

business intensity as the total amount of private RampD investments increased significantly

in the 2009 to 2014 period

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture C= manufacture G_N=services)

The biggest funder of business RampD is business itself but government funding and

funding from abroad have since 2010 both doubled their share of funding of business

RampD from 01 to 02 of GDP in 2015 Government funding and funding from abroad

therefore account for about 40 of the funding of business RampD

Manufacturing has increased its RampD intensity from about 04 to 101 of GDP

between 2005 and 2015 and it performed a bit more than half of Hungarian business

RampD in 2014 but services have since 2008 increased their RampD intensity from about

01 to 041 of GDP in 2014 and therefore now perform about one third of business

RampD

Within manufacturing pharmaceuticals is the most important research performer

accounting for some 60 of total manufacturing RampD Gedeon Richter is the only

Hungarian company that was included in the 2011 2012 2013 and 2014 EU Industrial

RampD Investment Scoreboard6 The pharmaceutical company spent HUF 388b (approx

euro130m) on research and development in 2012 which amounts to 119 of its

consolidated sales revenue7 and about 15 of total Hungarian business RampD intensity

Apart from a small drop in 2007 2011 and 2013 pharmaceuticals has seen a steady

increase in business RampD since 2005

The computer electronics and optical equipment sector as well as motor vehicles are the

two other main performers of RampD in manufacturing each accounting for about 20 of

6httpirijrceceuropaeuscoreboard14html 7httpswwwrichterhuen-USresearch-developementPagesResearch-activityaspx

11

manufacturing RampD They have both managed to almost double their RampD intensity since

2005 despite the crisis Motor vehicles have the highest share of high growth companies

with a share of 9-11 depending on the year8

43 Public sector innovation and civil society engagement

Public-sector innovation is defined as a new or significantly improved service

communication method process or organisational method The European Public Sector

Innovation Scoreboard 2013 report concludes that Hungary belongs to the EU countries

with 12 below-average scores out of the 22 total indicators observed Hungary lags

behind especially in government effectiveness regulatory quality increased efficiency of

government services due to the use of ICT online availability of public services share of

service and process innovators that innovate in-house as well as the government

procurement as a driver of business innovation and importance of innovation in

procurement Collaboration in the public sector is a major issue Hungary ranks the last

in terms of the amount of group work to develop innovation (6)9

In 2016 Hungary ranks 46th out of 193 countries in the E-Government Development

Index of the United Nations10 This is 7 positions worse than in 2014 In comparison

Austria ranks 16th Slovenia 21st Croatia 37th the Czech Republic 50th and Slovakia 67th

The E-participation rank (91st out of 193) worsened compared to 2014 (75th position out

of 193) the corresponding Hungarian score is only half of the United Kingdomrsquos

Citizen science initiatives are premature in Hungary as research agendas are generally

set by scientists or the management of research institutes that focus more on

achievement of scientific excellence than addressing societal grand challenges and

knowledge exploitation

5 Innovation challenges

51 Challenge 1 Fostering innovation in domestic enterprises

Description

The Innovation Union Scoreboard 2016 classifies Hungary as a ldquomoderate innovator

The level of innovation activities among the Hungarian companies is generally low

especially that of SMEs Although the total turnover of the business sector stemming

from innovation (97) is close to the EU-28 average (119) only about one-tenth

(106) of the Hungarian SMEs could be considered as innovative companies (EU-28

average is 287) Based on IUS 2016 data only 128 of the SMEs introduce some

kind of product or process innovations in Hungary a slight decrease compared to 2012

(141) that is less than half of the EU-28 average (306) These processes could be

explained by the high concentration of RampD activities in large companies 8 of all

Hungarian research units are responsible for half of the business expenditures on RampD

(KSH 2014) The small domestic firms lack their own funding for RampD and often wait for

public support in order to launch new RampI projects However such funding very often

does not reach the SMEs as they lack the level of tender and administration capacities

required by national and EU funds In general SMEs try to avoid taking risk and rarely

invest in RDI activities from their own pocket

8 If we exclude small companies with less than 10 employees the shares increase significantly but the pattern remains the same 9the highest is that of Swedenrsquos public administration (EPSIS 2013) 10See Hungarian E-government data at httpspublicadministrationunorgegovkben-usDataCountry-Informationid75-Hungary (Date of access 15 August 2016)

12

Policy response

It has been a high priority of the government to boost business RampD in the last decade

through tax incentives and direct measures supporting business RampD During the

planning of the 2014-2020 financial period the government has decided to allocate 60

of total available funding from the Structural Funds for economic development purposes

including non-refundable and refundable resources11 In 2016 research infrastructures

will receive fewer funds than in 2015 which is mainly due to the fade out support of the

ELI laser research laboratory12 Research projects receive less than 2 of the funds

slightly more than the international RDI activities Ongoing programmes such as the

ldquoIPR supportrdquo ldquoInnovation voucherrdquo ldquoInnovation ecosystemrdquo ldquoSmart specialisation

venture capital programmerdquo and ldquoPrototype product technology and service

developmentrdquo clearly focus on supporting research and innovation activities of SMEs and

start-ups

The largest part of domestic funding (37) from NKFIA is allocated to the National

Competitiveness and Excellence Program for enhancing technology transfer and for

Supporting Business RDI activities

Policy assessment

There are several measures in place that build on each other and form a fully-fledged

business RDI support mix Still the risk avoiding attitude both of the governmental

bodies and the SMEs (especially of the domestically owned ones) as well as the

unfavourable framework conditions are obstacles to accelerate the progress of

innovation In addition the lack of innovation experience the insufficient knowledge

base and human resources capacity hamper the development of the innovation process

In addition it depends a lot on the quality of the implementation of RDI measures in

order to achieve the expected outcomes What is more a systemic development of the

entire national innovation system is necessary so that to strengthen and synchronise all

the components of the innovation driving mechanisms

52 Challenge 2 Enhancing the cooperation between science

higher education and business

Description

Supporting cooperation between business and academia has been a high priority of STI

policy in Hungary that resulted in a number of positive developments such as the

growing number of corporate research centres and RampD labs (predominantly run by

multinationals) that work closely with academic partners Several RDI measures

supported the creation of this type of partnerships that usually last until they run out of

public funding Therefore sustainability of these partnerships is a real challenge as they

are not necessarily based on mutual interest of participating parties and lack longer-term

vision or commitment that could be financed with own resources later on The life-cycle

of business-academia partnerships is usually relatively short (1-2 years) and mainly

11 The Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) are of particular importance for STI policy that focus on five major objectives 1) business RDI activities 2) (technology and knowledge) transfer 3) (research) infrastructure 4) research projects and 5) international RDI According to the Annual Development Framework Programme clearly the business RDI activities will receive most of the funds in 2016 (71) among the main objectives of the GINOP sources This objective received the highest growth of available funds compared to 2015 (four times more) 12 In this way the transfer activities became the 2nd largest target with 15 of all funds (but the emphasis is put on the NKFIA sources in 2016 compared to GINOP in the previous year)

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

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statisztikai elemzeacutese 2009-2015 Corruption Research Centre Budapest Budapest

Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

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Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

Commission Joint Research Centre Institute for Prospective Technological Studies

EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

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European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Luxemburg

ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

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() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

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Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 8: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

7

details of labour productivity OECD (2016a) offers more insights Labour productivity

measured as a of GDP per hour worked seems to grow by 245 between 2009 and

2014 but during the same period grew only 018 of GDP per person employed This is

in relation with the governmental efforts to employ more low-skilled workforce through

eg the public work schemes Thus labour productivity contribution to the growth of GDP

per capita has decreased significantly compared to the period 2001-2007 The smaller a

firm is the bigger its gap to the OECD productivity average Manufacturing is the main

contributor to business sector productivity growth and to a lesser extent business

services (mainly trade hotels and transport)

21 Structure of the economy

Although Hungary is still a service-driven economy during the past five years the share

of industry (gross value added of GDP) has grown from 219 to 229 between

2010 and 2015 (without the construction sector) This share is the 7th highest among the

EU member states only after Ireland some other Central and Eastern European

Countries and Germany The growing share of the industry was mainly fuelled by new

vehicle manufacturing capacities which continue to largely determine the countryrsquos

industrial performance in 2016 (as well as in the next years) Manufacturing has an 89

share in industry and while industry has grown by 159 between 2010 and 2015 this

rate was 229 for manufacturing Simultaneously the services sector also has a higher

growth contribution based on increase in tourism retail trade and strengthening the

domestic demand Yet the share of knowledge intensive services ( of total value

added) is above 34 (but shrinking) while the share of high- and medium-high

manufacturing is above 13 (growing since 2010) According to the central Statistical

office besides the vehicle industry the pharmaceutics and machinery are spending the

highest amount on RampD2

22 Business environment

Hungary ranks 41st out of 190 economies in the ldquoDoing business 2017rdquo report produced

by the World Bank3 which is one position higher compared to 20164 Globally Hungary

ranks first () according to ldquotrading across bordersrdquo indicator and has prominent 20th

position for ldquogetting creditrdquo among 190 countries involved in the report Apart from

ldquogetting electricityrdquo (121st) the second worst position is reflected by the indicator

protecting minority investors which ranks 81st (World Bank 2016a)Hungary stands at

75 in the ranking of 190 economies on the ease of starting a business which is a better

position than its neighbouring countriesrsquo ranking ie Austria 111th Czech Republic 67th

Poland 107th In 2015 Hungary made starting a business more difficult by increasing the

paid-in minimum capital requirement In the last few years another major change in

starting a business was the increase of the registration fees for limited liability

companies and the addition of new tax registration at the time of incorporation as well

as and enforcing a requirement for mandatory registration with the Hungarian Chamber

of Commerce and Industryin 2013 (World Bank 2016b)

23 Supply of human resources

According to EIS (2016) the annual growth rate of new doctorate graduates in Hungary

is above the EU-average (36 vs 2) The proportion of doctorate students in science

2 httpstatinfokshhuStatinfohaViewerjsp 3 The rankings are benchmarked to June 2016 and based on the average of each economyrsquos distance to frontier (DTF) scores for the 11 topics included in aggregate ranking 4 Doing business 2016 ranking shown is not last yearrsquos published ranking but a comparable ranking for DB2016 that captures the effects of such factors as data corrections and the changes in methodology

8

and technology fields is stagnating at only 02 of the population aged 20-29 years (EU-

28 average 05 2014) Yet the share of new STEM graduates (as of 1000

population) has increased since 2010 from 11 to 14 by 2014 but remains well

below the EU-28 average of 23 (2014) More positive is the picture of the tertiary

education attainment (as a of the population aged 30-34) which has grown from

261 in 2010 to 343 in 2015 Furthermore Hungary is ranked at the 7th place in the

Digital Economy and Society Index (DESI) 2016 in the share of ICT specialists among

employed individuals (DESI 2016)

3 Main RampI actors

The central governmental actor in the Hungarian RDI system is the National Research

Development and Innovation Office (NKFIH) which is responsible for the realisation of

the governmental policies and the management of the RDI funds (both national and EU

sources) The NKFIH also incorporates the National Research Development and

Innovation (NKFI) Fund - the main domestic financial source for RDI The aim of the high

centralisation of the managing and financing bodies is the better coordination of the

governmental programmes and the financial mechanisms supporting basic research

experimental development and innovation

The Ministry of National Economy and the Ministry of National Development act as

managing authorities in running the Operational Programmes In addition the Ministry of

Human Capacities and the Ministry of Agriculture have responsibilities in research and

development overviewing sectoral activities

A relatively new actor in the Hungarian RDI system from the broader governmental

sphere is a foundation of the Hungarian Central Bank (Magyar Nemzeti Bank MNB) In

2014 the MNB established six foundations under the strong criticism of the parliamentary

opposition and generated active public debates The establishment and the operation of

the foundations are challenged due to their limited transparency

The academic sector in Hungary consists of two main groups of actors a) the Hungarian

Academy of Sciences (MTA) and its research institutions and b) higher education

research units The MTA is the single most significant public research actor representing

712 of the RampD expenditures of the public research sector (KSH 2014) In total the

public research sector spending is comparable to that of the higher education sectorrsquos

research expenditures (HUF 606bn and HUF 595bn in 2014) The MTA and its network

of research institutes are engaged mainly in basic or discovery research Research units

of higher education institutions are focused more on applied research largely due to their

collaboration with the business sphere

In the past few years the business sector has become the main research performer in

Hungary registering a remarkable growth both in RampD expenditures and in the number

of RampD personnel The share of RampD funded by the business has reached 066 of GDP

by 2015 The business RampD expenditure (BERD) has been growing significantly since

2010 (from 069 to 101 of GDP) but it is still only three-quarters of the level of EU-28

average in 2015 The business sector RampD activities are concentrated at and dominated

by few large mainly multinational corporations so the largest share of BERD is

generated by large companies Enterprises with more than 250 employees account for

51 of BERD spent in 2014 while enterprises with 50-249 employees account for 20

and enterprises with 10-49 employees account for 17 It can be seen as a positive

trend that since 2010 the share of the largest companies has slightly declined and that

of the medium and small-sized enterprises (SMEs) has slightly increased There are

specific support programmes (from national and EU sources and through the JEREMIE

programme) for start-up companies but their number and performance is still limited at

national level

9

4 RampI trends

Total GERD in Hungary was euro149233m in 2015 There are three main sources of RampD

funding in Hungary the business sector (euro75119m) the government sector

(euro52315m) and the foreign funding (euro22590m) GERD showed an upward trend with a

rather strong growth rate between 2008 and 2013 At the same time RampD funding by the

government has not increased proportionally5 Contribution from the private sector grew

faster and since 2007 the private sector has been the main contributor to GERD It is

important to notice also that at a first glance funding from the EU appears to be less

important even though structural funds are a major source for RampD funding This might

be due to the accounting system of Hungary that includes structural funds for RampD into

GERD funded by government

Figure 1 Government funding of the total GERD

Data source Eurostat November 2016

41 Public allocation of RampD and RampD expenditure

The public sector is the main recipient of government funded GERD although due to its

nominal stagnation its importance in total financing is decreasing Since 2005 the

business sector has been getting more and more public financing both in nominal and in

real terms becoming the driver of the increase of public support to RampD The RampD tax

incentives are still playing an important element of the domestic support policy The

direct costs of the RampD carried out in their own scope of activities have long been

deductible from the tax base of the corporate tax sole proprietorrsquos income tax local

business tax and innovation contribution For example those paying corporate tax

accounted for HUF288b (euro933m) RampD tax allowance in 2014 (NRP 2016 p21)

Reported by the NRP (2016) there will be a new and potentially significant allowance

introduced in 2016 ie local governments may decide at their discretion that

enterprises can reduce the sum of their local business tax by 10 of the direct costs of

RampD More and more corporations are using the tax relief which was extended to

5 The compounded annual growth rate (CAGR) of the publicly funded GERD for the period 2007-2013 is 47 whereas for the total GERD is 8

10

researchers participating in doctoral programmes in 2014 the estimated number of

doctoral students employed in industry exceeded 850 in 2015 (NRP 2016)

42 Private RampD expenditure

RampD performed by the business sector more than doubled from 04 to 099 of GDP

in the period 2004 to 2014 The increase in particular took place after 2008 and the

economic and financial crisis does not seem to have had a negative impact on overall

business intensity as the total amount of private RampD investments increased significantly

in the 2009 to 2014 period

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture C= manufacture G_N=services)

The biggest funder of business RampD is business itself but government funding and

funding from abroad have since 2010 both doubled their share of funding of business

RampD from 01 to 02 of GDP in 2015 Government funding and funding from abroad

therefore account for about 40 of the funding of business RampD

Manufacturing has increased its RampD intensity from about 04 to 101 of GDP

between 2005 and 2015 and it performed a bit more than half of Hungarian business

RampD in 2014 but services have since 2008 increased their RampD intensity from about

01 to 041 of GDP in 2014 and therefore now perform about one third of business

RampD

Within manufacturing pharmaceuticals is the most important research performer

accounting for some 60 of total manufacturing RampD Gedeon Richter is the only

Hungarian company that was included in the 2011 2012 2013 and 2014 EU Industrial

RampD Investment Scoreboard6 The pharmaceutical company spent HUF 388b (approx

euro130m) on research and development in 2012 which amounts to 119 of its

consolidated sales revenue7 and about 15 of total Hungarian business RampD intensity

Apart from a small drop in 2007 2011 and 2013 pharmaceuticals has seen a steady

increase in business RampD since 2005

The computer electronics and optical equipment sector as well as motor vehicles are the

two other main performers of RampD in manufacturing each accounting for about 20 of

6httpirijrceceuropaeuscoreboard14html 7httpswwwrichterhuen-USresearch-developementPagesResearch-activityaspx

11

manufacturing RampD They have both managed to almost double their RampD intensity since

2005 despite the crisis Motor vehicles have the highest share of high growth companies

with a share of 9-11 depending on the year8

43 Public sector innovation and civil society engagement

Public-sector innovation is defined as a new or significantly improved service

communication method process or organisational method The European Public Sector

Innovation Scoreboard 2013 report concludes that Hungary belongs to the EU countries

with 12 below-average scores out of the 22 total indicators observed Hungary lags

behind especially in government effectiveness regulatory quality increased efficiency of

government services due to the use of ICT online availability of public services share of

service and process innovators that innovate in-house as well as the government

procurement as a driver of business innovation and importance of innovation in

procurement Collaboration in the public sector is a major issue Hungary ranks the last

in terms of the amount of group work to develop innovation (6)9

In 2016 Hungary ranks 46th out of 193 countries in the E-Government Development

Index of the United Nations10 This is 7 positions worse than in 2014 In comparison

Austria ranks 16th Slovenia 21st Croatia 37th the Czech Republic 50th and Slovakia 67th

The E-participation rank (91st out of 193) worsened compared to 2014 (75th position out

of 193) the corresponding Hungarian score is only half of the United Kingdomrsquos

Citizen science initiatives are premature in Hungary as research agendas are generally

set by scientists or the management of research institutes that focus more on

achievement of scientific excellence than addressing societal grand challenges and

knowledge exploitation

5 Innovation challenges

51 Challenge 1 Fostering innovation in domestic enterprises

Description

The Innovation Union Scoreboard 2016 classifies Hungary as a ldquomoderate innovator

The level of innovation activities among the Hungarian companies is generally low

especially that of SMEs Although the total turnover of the business sector stemming

from innovation (97) is close to the EU-28 average (119) only about one-tenth

(106) of the Hungarian SMEs could be considered as innovative companies (EU-28

average is 287) Based on IUS 2016 data only 128 of the SMEs introduce some

kind of product or process innovations in Hungary a slight decrease compared to 2012

(141) that is less than half of the EU-28 average (306) These processes could be

explained by the high concentration of RampD activities in large companies 8 of all

Hungarian research units are responsible for half of the business expenditures on RampD

(KSH 2014) The small domestic firms lack their own funding for RampD and often wait for

public support in order to launch new RampI projects However such funding very often

does not reach the SMEs as they lack the level of tender and administration capacities

required by national and EU funds In general SMEs try to avoid taking risk and rarely

invest in RDI activities from their own pocket

8 If we exclude small companies with less than 10 employees the shares increase significantly but the pattern remains the same 9the highest is that of Swedenrsquos public administration (EPSIS 2013) 10See Hungarian E-government data at httpspublicadministrationunorgegovkben-usDataCountry-Informationid75-Hungary (Date of access 15 August 2016)

12

Policy response

It has been a high priority of the government to boost business RampD in the last decade

through tax incentives and direct measures supporting business RampD During the

planning of the 2014-2020 financial period the government has decided to allocate 60

of total available funding from the Structural Funds for economic development purposes

including non-refundable and refundable resources11 In 2016 research infrastructures

will receive fewer funds than in 2015 which is mainly due to the fade out support of the

ELI laser research laboratory12 Research projects receive less than 2 of the funds

slightly more than the international RDI activities Ongoing programmes such as the

ldquoIPR supportrdquo ldquoInnovation voucherrdquo ldquoInnovation ecosystemrdquo ldquoSmart specialisation

venture capital programmerdquo and ldquoPrototype product technology and service

developmentrdquo clearly focus on supporting research and innovation activities of SMEs and

start-ups

The largest part of domestic funding (37) from NKFIA is allocated to the National

Competitiveness and Excellence Program for enhancing technology transfer and for

Supporting Business RDI activities

Policy assessment

There are several measures in place that build on each other and form a fully-fledged

business RDI support mix Still the risk avoiding attitude both of the governmental

bodies and the SMEs (especially of the domestically owned ones) as well as the

unfavourable framework conditions are obstacles to accelerate the progress of

innovation In addition the lack of innovation experience the insufficient knowledge

base and human resources capacity hamper the development of the innovation process

In addition it depends a lot on the quality of the implementation of RDI measures in

order to achieve the expected outcomes What is more a systemic development of the

entire national innovation system is necessary so that to strengthen and synchronise all

the components of the innovation driving mechanisms

52 Challenge 2 Enhancing the cooperation between science

higher education and business

Description

Supporting cooperation between business and academia has been a high priority of STI

policy in Hungary that resulted in a number of positive developments such as the

growing number of corporate research centres and RampD labs (predominantly run by

multinationals) that work closely with academic partners Several RDI measures

supported the creation of this type of partnerships that usually last until they run out of

public funding Therefore sustainability of these partnerships is a real challenge as they

are not necessarily based on mutual interest of participating parties and lack longer-term

vision or commitment that could be financed with own resources later on The life-cycle

of business-academia partnerships is usually relatively short (1-2 years) and mainly

11 The Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) are of particular importance for STI policy that focus on five major objectives 1) business RDI activities 2) (technology and knowledge) transfer 3) (research) infrastructure 4) research projects and 5) international RDI According to the Annual Development Framework Programme clearly the business RDI activities will receive most of the funds in 2016 (71) among the main objectives of the GINOP sources This objective received the highest growth of available funds compared to 2015 (four times more) 12 In this way the transfer activities became the 2nd largest target with 15 of all funds (but the emphasis is put on the NKFIA sources in 2016 compared to GINOP in the previous year)

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

Budapest

Convergence programme of Hungary 2016-2020 (2016)

httpeceuropaeueurope2020making-it-happencountry-specific-

recommendationsindex_enhtm

CRCB (2016) Versenyerősseacuteg eacutes korrupcioacutek kockaacutezatok A Magyar koumlzbeszerzeacutesek

statisztikai elemzeacutese 2009-2015 Corruption Research Centre Budapest Budapest

Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

Research Centre Institute for Prospective Technological Studies EUR 27322 EN

Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

Commission Joint Research Centre Institute for Prospective Technological Studies

EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Directorate-General for Research and Innovation

European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Luxemburg

ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 9: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

8

and technology fields is stagnating at only 02 of the population aged 20-29 years (EU-

28 average 05 2014) Yet the share of new STEM graduates (as of 1000

population) has increased since 2010 from 11 to 14 by 2014 but remains well

below the EU-28 average of 23 (2014) More positive is the picture of the tertiary

education attainment (as a of the population aged 30-34) which has grown from

261 in 2010 to 343 in 2015 Furthermore Hungary is ranked at the 7th place in the

Digital Economy and Society Index (DESI) 2016 in the share of ICT specialists among

employed individuals (DESI 2016)

3 Main RampI actors

The central governmental actor in the Hungarian RDI system is the National Research

Development and Innovation Office (NKFIH) which is responsible for the realisation of

the governmental policies and the management of the RDI funds (both national and EU

sources) The NKFIH also incorporates the National Research Development and

Innovation (NKFI) Fund - the main domestic financial source for RDI The aim of the high

centralisation of the managing and financing bodies is the better coordination of the

governmental programmes and the financial mechanisms supporting basic research

experimental development and innovation

The Ministry of National Economy and the Ministry of National Development act as

managing authorities in running the Operational Programmes In addition the Ministry of

Human Capacities and the Ministry of Agriculture have responsibilities in research and

development overviewing sectoral activities

A relatively new actor in the Hungarian RDI system from the broader governmental

sphere is a foundation of the Hungarian Central Bank (Magyar Nemzeti Bank MNB) In

2014 the MNB established six foundations under the strong criticism of the parliamentary

opposition and generated active public debates The establishment and the operation of

the foundations are challenged due to their limited transparency

The academic sector in Hungary consists of two main groups of actors a) the Hungarian

Academy of Sciences (MTA) and its research institutions and b) higher education

research units The MTA is the single most significant public research actor representing

712 of the RampD expenditures of the public research sector (KSH 2014) In total the

public research sector spending is comparable to that of the higher education sectorrsquos

research expenditures (HUF 606bn and HUF 595bn in 2014) The MTA and its network

of research institutes are engaged mainly in basic or discovery research Research units

of higher education institutions are focused more on applied research largely due to their

collaboration with the business sphere

In the past few years the business sector has become the main research performer in

Hungary registering a remarkable growth both in RampD expenditures and in the number

of RampD personnel The share of RampD funded by the business has reached 066 of GDP

by 2015 The business RampD expenditure (BERD) has been growing significantly since

2010 (from 069 to 101 of GDP) but it is still only three-quarters of the level of EU-28

average in 2015 The business sector RampD activities are concentrated at and dominated

by few large mainly multinational corporations so the largest share of BERD is

generated by large companies Enterprises with more than 250 employees account for

51 of BERD spent in 2014 while enterprises with 50-249 employees account for 20

and enterprises with 10-49 employees account for 17 It can be seen as a positive

trend that since 2010 the share of the largest companies has slightly declined and that

of the medium and small-sized enterprises (SMEs) has slightly increased There are

specific support programmes (from national and EU sources and through the JEREMIE

programme) for start-up companies but their number and performance is still limited at

national level

9

4 RampI trends

Total GERD in Hungary was euro149233m in 2015 There are three main sources of RampD

funding in Hungary the business sector (euro75119m) the government sector

(euro52315m) and the foreign funding (euro22590m) GERD showed an upward trend with a

rather strong growth rate between 2008 and 2013 At the same time RampD funding by the

government has not increased proportionally5 Contribution from the private sector grew

faster and since 2007 the private sector has been the main contributor to GERD It is

important to notice also that at a first glance funding from the EU appears to be less

important even though structural funds are a major source for RampD funding This might

be due to the accounting system of Hungary that includes structural funds for RampD into

GERD funded by government

Figure 1 Government funding of the total GERD

Data source Eurostat November 2016

41 Public allocation of RampD and RampD expenditure

The public sector is the main recipient of government funded GERD although due to its

nominal stagnation its importance in total financing is decreasing Since 2005 the

business sector has been getting more and more public financing both in nominal and in

real terms becoming the driver of the increase of public support to RampD The RampD tax

incentives are still playing an important element of the domestic support policy The

direct costs of the RampD carried out in their own scope of activities have long been

deductible from the tax base of the corporate tax sole proprietorrsquos income tax local

business tax and innovation contribution For example those paying corporate tax

accounted for HUF288b (euro933m) RampD tax allowance in 2014 (NRP 2016 p21)

Reported by the NRP (2016) there will be a new and potentially significant allowance

introduced in 2016 ie local governments may decide at their discretion that

enterprises can reduce the sum of their local business tax by 10 of the direct costs of

RampD More and more corporations are using the tax relief which was extended to

5 The compounded annual growth rate (CAGR) of the publicly funded GERD for the period 2007-2013 is 47 whereas for the total GERD is 8

10

researchers participating in doctoral programmes in 2014 the estimated number of

doctoral students employed in industry exceeded 850 in 2015 (NRP 2016)

42 Private RampD expenditure

RampD performed by the business sector more than doubled from 04 to 099 of GDP

in the period 2004 to 2014 The increase in particular took place after 2008 and the

economic and financial crisis does not seem to have had a negative impact on overall

business intensity as the total amount of private RampD investments increased significantly

in the 2009 to 2014 period

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture C= manufacture G_N=services)

The biggest funder of business RampD is business itself but government funding and

funding from abroad have since 2010 both doubled their share of funding of business

RampD from 01 to 02 of GDP in 2015 Government funding and funding from abroad

therefore account for about 40 of the funding of business RampD

Manufacturing has increased its RampD intensity from about 04 to 101 of GDP

between 2005 and 2015 and it performed a bit more than half of Hungarian business

RampD in 2014 but services have since 2008 increased their RampD intensity from about

01 to 041 of GDP in 2014 and therefore now perform about one third of business

RampD

Within manufacturing pharmaceuticals is the most important research performer

accounting for some 60 of total manufacturing RampD Gedeon Richter is the only

Hungarian company that was included in the 2011 2012 2013 and 2014 EU Industrial

RampD Investment Scoreboard6 The pharmaceutical company spent HUF 388b (approx

euro130m) on research and development in 2012 which amounts to 119 of its

consolidated sales revenue7 and about 15 of total Hungarian business RampD intensity

Apart from a small drop in 2007 2011 and 2013 pharmaceuticals has seen a steady

increase in business RampD since 2005

The computer electronics and optical equipment sector as well as motor vehicles are the

two other main performers of RampD in manufacturing each accounting for about 20 of

6httpirijrceceuropaeuscoreboard14html 7httpswwwrichterhuen-USresearch-developementPagesResearch-activityaspx

11

manufacturing RampD They have both managed to almost double their RampD intensity since

2005 despite the crisis Motor vehicles have the highest share of high growth companies

with a share of 9-11 depending on the year8

43 Public sector innovation and civil society engagement

Public-sector innovation is defined as a new or significantly improved service

communication method process or organisational method The European Public Sector

Innovation Scoreboard 2013 report concludes that Hungary belongs to the EU countries

with 12 below-average scores out of the 22 total indicators observed Hungary lags

behind especially in government effectiveness regulatory quality increased efficiency of

government services due to the use of ICT online availability of public services share of

service and process innovators that innovate in-house as well as the government

procurement as a driver of business innovation and importance of innovation in

procurement Collaboration in the public sector is a major issue Hungary ranks the last

in terms of the amount of group work to develop innovation (6)9

In 2016 Hungary ranks 46th out of 193 countries in the E-Government Development

Index of the United Nations10 This is 7 positions worse than in 2014 In comparison

Austria ranks 16th Slovenia 21st Croatia 37th the Czech Republic 50th and Slovakia 67th

The E-participation rank (91st out of 193) worsened compared to 2014 (75th position out

of 193) the corresponding Hungarian score is only half of the United Kingdomrsquos

Citizen science initiatives are premature in Hungary as research agendas are generally

set by scientists or the management of research institutes that focus more on

achievement of scientific excellence than addressing societal grand challenges and

knowledge exploitation

5 Innovation challenges

51 Challenge 1 Fostering innovation in domestic enterprises

Description

The Innovation Union Scoreboard 2016 classifies Hungary as a ldquomoderate innovator

The level of innovation activities among the Hungarian companies is generally low

especially that of SMEs Although the total turnover of the business sector stemming

from innovation (97) is close to the EU-28 average (119) only about one-tenth

(106) of the Hungarian SMEs could be considered as innovative companies (EU-28

average is 287) Based on IUS 2016 data only 128 of the SMEs introduce some

kind of product or process innovations in Hungary a slight decrease compared to 2012

(141) that is less than half of the EU-28 average (306) These processes could be

explained by the high concentration of RampD activities in large companies 8 of all

Hungarian research units are responsible for half of the business expenditures on RampD

(KSH 2014) The small domestic firms lack their own funding for RampD and often wait for

public support in order to launch new RampI projects However such funding very often

does not reach the SMEs as they lack the level of tender and administration capacities

required by national and EU funds In general SMEs try to avoid taking risk and rarely

invest in RDI activities from their own pocket

8 If we exclude small companies with less than 10 employees the shares increase significantly but the pattern remains the same 9the highest is that of Swedenrsquos public administration (EPSIS 2013) 10See Hungarian E-government data at httpspublicadministrationunorgegovkben-usDataCountry-Informationid75-Hungary (Date of access 15 August 2016)

12

Policy response

It has been a high priority of the government to boost business RampD in the last decade

through tax incentives and direct measures supporting business RampD During the

planning of the 2014-2020 financial period the government has decided to allocate 60

of total available funding from the Structural Funds for economic development purposes

including non-refundable and refundable resources11 In 2016 research infrastructures

will receive fewer funds than in 2015 which is mainly due to the fade out support of the

ELI laser research laboratory12 Research projects receive less than 2 of the funds

slightly more than the international RDI activities Ongoing programmes such as the

ldquoIPR supportrdquo ldquoInnovation voucherrdquo ldquoInnovation ecosystemrdquo ldquoSmart specialisation

venture capital programmerdquo and ldquoPrototype product technology and service

developmentrdquo clearly focus on supporting research and innovation activities of SMEs and

start-ups

The largest part of domestic funding (37) from NKFIA is allocated to the National

Competitiveness and Excellence Program for enhancing technology transfer and for

Supporting Business RDI activities

Policy assessment

There are several measures in place that build on each other and form a fully-fledged

business RDI support mix Still the risk avoiding attitude both of the governmental

bodies and the SMEs (especially of the domestically owned ones) as well as the

unfavourable framework conditions are obstacles to accelerate the progress of

innovation In addition the lack of innovation experience the insufficient knowledge

base and human resources capacity hamper the development of the innovation process

In addition it depends a lot on the quality of the implementation of RDI measures in

order to achieve the expected outcomes What is more a systemic development of the

entire national innovation system is necessary so that to strengthen and synchronise all

the components of the innovation driving mechanisms

52 Challenge 2 Enhancing the cooperation between science

higher education and business

Description

Supporting cooperation between business and academia has been a high priority of STI

policy in Hungary that resulted in a number of positive developments such as the

growing number of corporate research centres and RampD labs (predominantly run by

multinationals) that work closely with academic partners Several RDI measures

supported the creation of this type of partnerships that usually last until they run out of

public funding Therefore sustainability of these partnerships is a real challenge as they

are not necessarily based on mutual interest of participating parties and lack longer-term

vision or commitment that could be financed with own resources later on The life-cycle

of business-academia partnerships is usually relatively short (1-2 years) and mainly

11 The Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) are of particular importance for STI policy that focus on five major objectives 1) business RDI activities 2) (technology and knowledge) transfer 3) (research) infrastructure 4) research projects and 5) international RDI According to the Annual Development Framework Programme clearly the business RDI activities will receive most of the funds in 2016 (71) among the main objectives of the GINOP sources This objective received the highest growth of available funds compared to 2015 (four times more) 12 In this way the transfer activities became the 2nd largest target with 15 of all funds (but the emphasis is put on the NKFIA sources in 2016 compared to GINOP in the previous year)

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

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Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

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EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

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EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

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European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

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EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

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ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

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Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

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Hungarian Central Statistical Office Budapest September 2015

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Budapest

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KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

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httpstatinfokshhuStatinfohaViewerjsp

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innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

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(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

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White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

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portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

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NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

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OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

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OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

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Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 10: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

9

4 RampI trends

Total GERD in Hungary was euro149233m in 2015 There are three main sources of RampD

funding in Hungary the business sector (euro75119m) the government sector

(euro52315m) and the foreign funding (euro22590m) GERD showed an upward trend with a

rather strong growth rate between 2008 and 2013 At the same time RampD funding by the

government has not increased proportionally5 Contribution from the private sector grew

faster and since 2007 the private sector has been the main contributor to GERD It is

important to notice also that at a first glance funding from the EU appears to be less

important even though structural funds are a major source for RampD funding This might

be due to the accounting system of Hungary that includes structural funds for RampD into

GERD funded by government

Figure 1 Government funding of the total GERD

Data source Eurostat November 2016

41 Public allocation of RampD and RampD expenditure

The public sector is the main recipient of government funded GERD although due to its

nominal stagnation its importance in total financing is decreasing Since 2005 the

business sector has been getting more and more public financing both in nominal and in

real terms becoming the driver of the increase of public support to RampD The RampD tax

incentives are still playing an important element of the domestic support policy The

direct costs of the RampD carried out in their own scope of activities have long been

deductible from the tax base of the corporate tax sole proprietorrsquos income tax local

business tax and innovation contribution For example those paying corporate tax

accounted for HUF288b (euro933m) RampD tax allowance in 2014 (NRP 2016 p21)

Reported by the NRP (2016) there will be a new and potentially significant allowance

introduced in 2016 ie local governments may decide at their discretion that

enterprises can reduce the sum of their local business tax by 10 of the direct costs of

RampD More and more corporations are using the tax relief which was extended to

5 The compounded annual growth rate (CAGR) of the publicly funded GERD for the period 2007-2013 is 47 whereas for the total GERD is 8

10

researchers participating in doctoral programmes in 2014 the estimated number of

doctoral students employed in industry exceeded 850 in 2015 (NRP 2016)

42 Private RampD expenditure

RampD performed by the business sector more than doubled from 04 to 099 of GDP

in the period 2004 to 2014 The increase in particular took place after 2008 and the

economic and financial crisis does not seem to have had a negative impact on overall

business intensity as the total amount of private RampD investments increased significantly

in the 2009 to 2014 period

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture C= manufacture G_N=services)

The biggest funder of business RampD is business itself but government funding and

funding from abroad have since 2010 both doubled their share of funding of business

RampD from 01 to 02 of GDP in 2015 Government funding and funding from abroad

therefore account for about 40 of the funding of business RampD

Manufacturing has increased its RampD intensity from about 04 to 101 of GDP

between 2005 and 2015 and it performed a bit more than half of Hungarian business

RampD in 2014 but services have since 2008 increased their RampD intensity from about

01 to 041 of GDP in 2014 and therefore now perform about one third of business

RampD

Within manufacturing pharmaceuticals is the most important research performer

accounting for some 60 of total manufacturing RampD Gedeon Richter is the only

Hungarian company that was included in the 2011 2012 2013 and 2014 EU Industrial

RampD Investment Scoreboard6 The pharmaceutical company spent HUF 388b (approx

euro130m) on research and development in 2012 which amounts to 119 of its

consolidated sales revenue7 and about 15 of total Hungarian business RampD intensity

Apart from a small drop in 2007 2011 and 2013 pharmaceuticals has seen a steady

increase in business RampD since 2005

The computer electronics and optical equipment sector as well as motor vehicles are the

two other main performers of RampD in manufacturing each accounting for about 20 of

6httpirijrceceuropaeuscoreboard14html 7httpswwwrichterhuen-USresearch-developementPagesResearch-activityaspx

11

manufacturing RampD They have both managed to almost double their RampD intensity since

2005 despite the crisis Motor vehicles have the highest share of high growth companies

with a share of 9-11 depending on the year8

43 Public sector innovation and civil society engagement

Public-sector innovation is defined as a new or significantly improved service

communication method process or organisational method The European Public Sector

Innovation Scoreboard 2013 report concludes that Hungary belongs to the EU countries

with 12 below-average scores out of the 22 total indicators observed Hungary lags

behind especially in government effectiveness regulatory quality increased efficiency of

government services due to the use of ICT online availability of public services share of

service and process innovators that innovate in-house as well as the government

procurement as a driver of business innovation and importance of innovation in

procurement Collaboration in the public sector is a major issue Hungary ranks the last

in terms of the amount of group work to develop innovation (6)9

In 2016 Hungary ranks 46th out of 193 countries in the E-Government Development

Index of the United Nations10 This is 7 positions worse than in 2014 In comparison

Austria ranks 16th Slovenia 21st Croatia 37th the Czech Republic 50th and Slovakia 67th

The E-participation rank (91st out of 193) worsened compared to 2014 (75th position out

of 193) the corresponding Hungarian score is only half of the United Kingdomrsquos

Citizen science initiatives are premature in Hungary as research agendas are generally

set by scientists or the management of research institutes that focus more on

achievement of scientific excellence than addressing societal grand challenges and

knowledge exploitation

5 Innovation challenges

51 Challenge 1 Fostering innovation in domestic enterprises

Description

The Innovation Union Scoreboard 2016 classifies Hungary as a ldquomoderate innovator

The level of innovation activities among the Hungarian companies is generally low

especially that of SMEs Although the total turnover of the business sector stemming

from innovation (97) is close to the EU-28 average (119) only about one-tenth

(106) of the Hungarian SMEs could be considered as innovative companies (EU-28

average is 287) Based on IUS 2016 data only 128 of the SMEs introduce some

kind of product or process innovations in Hungary a slight decrease compared to 2012

(141) that is less than half of the EU-28 average (306) These processes could be

explained by the high concentration of RampD activities in large companies 8 of all

Hungarian research units are responsible for half of the business expenditures on RampD

(KSH 2014) The small domestic firms lack their own funding for RampD and often wait for

public support in order to launch new RampI projects However such funding very often

does not reach the SMEs as they lack the level of tender and administration capacities

required by national and EU funds In general SMEs try to avoid taking risk and rarely

invest in RDI activities from their own pocket

8 If we exclude small companies with less than 10 employees the shares increase significantly but the pattern remains the same 9the highest is that of Swedenrsquos public administration (EPSIS 2013) 10See Hungarian E-government data at httpspublicadministrationunorgegovkben-usDataCountry-Informationid75-Hungary (Date of access 15 August 2016)

12

Policy response

It has been a high priority of the government to boost business RampD in the last decade

through tax incentives and direct measures supporting business RampD During the

planning of the 2014-2020 financial period the government has decided to allocate 60

of total available funding from the Structural Funds for economic development purposes

including non-refundable and refundable resources11 In 2016 research infrastructures

will receive fewer funds than in 2015 which is mainly due to the fade out support of the

ELI laser research laboratory12 Research projects receive less than 2 of the funds

slightly more than the international RDI activities Ongoing programmes such as the

ldquoIPR supportrdquo ldquoInnovation voucherrdquo ldquoInnovation ecosystemrdquo ldquoSmart specialisation

venture capital programmerdquo and ldquoPrototype product technology and service

developmentrdquo clearly focus on supporting research and innovation activities of SMEs and

start-ups

The largest part of domestic funding (37) from NKFIA is allocated to the National

Competitiveness and Excellence Program for enhancing technology transfer and for

Supporting Business RDI activities

Policy assessment

There are several measures in place that build on each other and form a fully-fledged

business RDI support mix Still the risk avoiding attitude both of the governmental

bodies and the SMEs (especially of the domestically owned ones) as well as the

unfavourable framework conditions are obstacles to accelerate the progress of

innovation In addition the lack of innovation experience the insufficient knowledge

base and human resources capacity hamper the development of the innovation process

In addition it depends a lot on the quality of the implementation of RDI measures in

order to achieve the expected outcomes What is more a systemic development of the

entire national innovation system is necessary so that to strengthen and synchronise all

the components of the innovation driving mechanisms

52 Challenge 2 Enhancing the cooperation between science

higher education and business

Description

Supporting cooperation between business and academia has been a high priority of STI

policy in Hungary that resulted in a number of positive developments such as the

growing number of corporate research centres and RampD labs (predominantly run by

multinationals) that work closely with academic partners Several RDI measures

supported the creation of this type of partnerships that usually last until they run out of

public funding Therefore sustainability of these partnerships is a real challenge as they

are not necessarily based on mutual interest of participating parties and lack longer-term

vision or commitment that could be financed with own resources later on The life-cycle

of business-academia partnerships is usually relatively short (1-2 years) and mainly

11 The Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) are of particular importance for STI policy that focus on five major objectives 1) business RDI activities 2) (technology and knowledge) transfer 3) (research) infrastructure 4) research projects and 5) international RDI According to the Annual Development Framework Programme clearly the business RDI activities will receive most of the funds in 2016 (71) among the main objectives of the GINOP sources This objective received the highest growth of available funds compared to 2015 (four times more) 12 In this way the transfer activities became the 2nd largest target with 15 of all funds (but the emphasis is put on the NKFIA sources in 2016 compared to GINOP in the previous year)

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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Colosseum (2015) A hazai klaszterakkreditaacutecioacutes rendszer feluumllvizsgaacutelata eacutes a

meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

Budapest

Convergence programme of Hungary 2016-2020 (2016)

httpeceuropaeueurope2020making-it-happencountry-specific-

recommendationsindex_enhtm

CRCB (2016) Versenyerősseacuteg eacutes korrupcioacutek kockaacutezatok A Magyar koumlzbeszerzeacutesek

statisztikai elemzeacutese 2009-2015 Corruption Research Centre Budapest Budapest

Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

Research Centre Institute for Prospective Technological Studies EUR 27322 EN

Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

Commission Joint Research Centre Institute for Prospective Technological Studies

EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Directorate-General for Research and Innovation

European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Luxemburg

ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 11: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

10

researchers participating in doctoral programmes in 2014 the estimated number of

doctoral students employed in industry exceeded 850 in 2015 (NRP 2016)

42 Private RampD expenditure

RampD performed by the business sector more than doubled from 04 to 099 of GDP

in the period 2004 to 2014 The increase in particular took place after 2008 and the

economic and financial crisis does not seem to have had a negative impact on overall

business intensity as the total amount of private RampD investments increased significantly

in the 2009 to 2014 period

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture C= manufacture G_N=services)

The biggest funder of business RampD is business itself but government funding and

funding from abroad have since 2010 both doubled their share of funding of business

RampD from 01 to 02 of GDP in 2015 Government funding and funding from abroad

therefore account for about 40 of the funding of business RampD

Manufacturing has increased its RampD intensity from about 04 to 101 of GDP

between 2005 and 2015 and it performed a bit more than half of Hungarian business

RampD in 2014 but services have since 2008 increased their RampD intensity from about

01 to 041 of GDP in 2014 and therefore now perform about one third of business

RampD

Within manufacturing pharmaceuticals is the most important research performer

accounting for some 60 of total manufacturing RampD Gedeon Richter is the only

Hungarian company that was included in the 2011 2012 2013 and 2014 EU Industrial

RampD Investment Scoreboard6 The pharmaceutical company spent HUF 388b (approx

euro130m) on research and development in 2012 which amounts to 119 of its

consolidated sales revenue7 and about 15 of total Hungarian business RampD intensity

Apart from a small drop in 2007 2011 and 2013 pharmaceuticals has seen a steady

increase in business RampD since 2005

The computer electronics and optical equipment sector as well as motor vehicles are the

two other main performers of RampD in manufacturing each accounting for about 20 of

6httpirijrceceuropaeuscoreboard14html 7httpswwwrichterhuen-USresearch-developementPagesResearch-activityaspx

11

manufacturing RampD They have both managed to almost double their RampD intensity since

2005 despite the crisis Motor vehicles have the highest share of high growth companies

with a share of 9-11 depending on the year8

43 Public sector innovation and civil society engagement

Public-sector innovation is defined as a new or significantly improved service

communication method process or organisational method The European Public Sector

Innovation Scoreboard 2013 report concludes that Hungary belongs to the EU countries

with 12 below-average scores out of the 22 total indicators observed Hungary lags

behind especially in government effectiveness regulatory quality increased efficiency of

government services due to the use of ICT online availability of public services share of

service and process innovators that innovate in-house as well as the government

procurement as a driver of business innovation and importance of innovation in

procurement Collaboration in the public sector is a major issue Hungary ranks the last

in terms of the amount of group work to develop innovation (6)9

In 2016 Hungary ranks 46th out of 193 countries in the E-Government Development

Index of the United Nations10 This is 7 positions worse than in 2014 In comparison

Austria ranks 16th Slovenia 21st Croatia 37th the Czech Republic 50th and Slovakia 67th

The E-participation rank (91st out of 193) worsened compared to 2014 (75th position out

of 193) the corresponding Hungarian score is only half of the United Kingdomrsquos

Citizen science initiatives are premature in Hungary as research agendas are generally

set by scientists or the management of research institutes that focus more on

achievement of scientific excellence than addressing societal grand challenges and

knowledge exploitation

5 Innovation challenges

51 Challenge 1 Fostering innovation in domestic enterprises

Description

The Innovation Union Scoreboard 2016 classifies Hungary as a ldquomoderate innovator

The level of innovation activities among the Hungarian companies is generally low

especially that of SMEs Although the total turnover of the business sector stemming

from innovation (97) is close to the EU-28 average (119) only about one-tenth

(106) of the Hungarian SMEs could be considered as innovative companies (EU-28

average is 287) Based on IUS 2016 data only 128 of the SMEs introduce some

kind of product or process innovations in Hungary a slight decrease compared to 2012

(141) that is less than half of the EU-28 average (306) These processes could be

explained by the high concentration of RampD activities in large companies 8 of all

Hungarian research units are responsible for half of the business expenditures on RampD

(KSH 2014) The small domestic firms lack their own funding for RampD and often wait for

public support in order to launch new RampI projects However such funding very often

does not reach the SMEs as they lack the level of tender and administration capacities

required by national and EU funds In general SMEs try to avoid taking risk and rarely

invest in RDI activities from their own pocket

8 If we exclude small companies with less than 10 employees the shares increase significantly but the pattern remains the same 9the highest is that of Swedenrsquos public administration (EPSIS 2013) 10See Hungarian E-government data at httpspublicadministrationunorgegovkben-usDataCountry-Informationid75-Hungary (Date of access 15 August 2016)

12

Policy response

It has been a high priority of the government to boost business RampD in the last decade

through tax incentives and direct measures supporting business RampD During the

planning of the 2014-2020 financial period the government has decided to allocate 60

of total available funding from the Structural Funds for economic development purposes

including non-refundable and refundable resources11 In 2016 research infrastructures

will receive fewer funds than in 2015 which is mainly due to the fade out support of the

ELI laser research laboratory12 Research projects receive less than 2 of the funds

slightly more than the international RDI activities Ongoing programmes such as the

ldquoIPR supportrdquo ldquoInnovation voucherrdquo ldquoInnovation ecosystemrdquo ldquoSmart specialisation

venture capital programmerdquo and ldquoPrototype product technology and service

developmentrdquo clearly focus on supporting research and innovation activities of SMEs and

start-ups

The largest part of domestic funding (37) from NKFIA is allocated to the National

Competitiveness and Excellence Program for enhancing technology transfer and for

Supporting Business RDI activities

Policy assessment

There are several measures in place that build on each other and form a fully-fledged

business RDI support mix Still the risk avoiding attitude both of the governmental

bodies and the SMEs (especially of the domestically owned ones) as well as the

unfavourable framework conditions are obstacles to accelerate the progress of

innovation In addition the lack of innovation experience the insufficient knowledge

base and human resources capacity hamper the development of the innovation process

In addition it depends a lot on the quality of the implementation of RDI measures in

order to achieve the expected outcomes What is more a systemic development of the

entire national innovation system is necessary so that to strengthen and synchronise all

the components of the innovation driving mechanisms

52 Challenge 2 Enhancing the cooperation between science

higher education and business

Description

Supporting cooperation between business and academia has been a high priority of STI

policy in Hungary that resulted in a number of positive developments such as the

growing number of corporate research centres and RampD labs (predominantly run by

multinationals) that work closely with academic partners Several RDI measures

supported the creation of this type of partnerships that usually last until they run out of

public funding Therefore sustainability of these partnerships is a real challenge as they

are not necessarily based on mutual interest of participating parties and lack longer-term

vision or commitment that could be financed with own resources later on The life-cycle

of business-academia partnerships is usually relatively short (1-2 years) and mainly

11 The Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) are of particular importance for STI policy that focus on five major objectives 1) business RDI activities 2) (technology and knowledge) transfer 3) (research) infrastructure 4) research projects and 5) international RDI According to the Annual Development Framework Programme clearly the business RDI activities will receive most of the funds in 2016 (71) among the main objectives of the GINOP sources This objective received the highest growth of available funds compared to 2015 (four times more) 12 In this way the transfer activities became the 2nd largest target with 15 of all funds (but the emphasis is put on the NKFIA sources in 2016 compared to GINOP in the previous year)

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

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European Commission Brussels

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httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

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imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

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httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

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European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

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by the EVCA Central and Eastern Europe Task Force August 2015

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szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

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Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

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KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

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NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

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NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

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Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

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22

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World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

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Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 12: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

11

manufacturing RampD They have both managed to almost double their RampD intensity since

2005 despite the crisis Motor vehicles have the highest share of high growth companies

with a share of 9-11 depending on the year8

43 Public sector innovation and civil society engagement

Public-sector innovation is defined as a new or significantly improved service

communication method process or organisational method The European Public Sector

Innovation Scoreboard 2013 report concludes that Hungary belongs to the EU countries

with 12 below-average scores out of the 22 total indicators observed Hungary lags

behind especially in government effectiveness regulatory quality increased efficiency of

government services due to the use of ICT online availability of public services share of

service and process innovators that innovate in-house as well as the government

procurement as a driver of business innovation and importance of innovation in

procurement Collaboration in the public sector is a major issue Hungary ranks the last

in terms of the amount of group work to develop innovation (6)9

In 2016 Hungary ranks 46th out of 193 countries in the E-Government Development

Index of the United Nations10 This is 7 positions worse than in 2014 In comparison

Austria ranks 16th Slovenia 21st Croatia 37th the Czech Republic 50th and Slovakia 67th

The E-participation rank (91st out of 193) worsened compared to 2014 (75th position out

of 193) the corresponding Hungarian score is only half of the United Kingdomrsquos

Citizen science initiatives are premature in Hungary as research agendas are generally

set by scientists or the management of research institutes that focus more on

achievement of scientific excellence than addressing societal grand challenges and

knowledge exploitation

5 Innovation challenges

51 Challenge 1 Fostering innovation in domestic enterprises

Description

The Innovation Union Scoreboard 2016 classifies Hungary as a ldquomoderate innovator

The level of innovation activities among the Hungarian companies is generally low

especially that of SMEs Although the total turnover of the business sector stemming

from innovation (97) is close to the EU-28 average (119) only about one-tenth

(106) of the Hungarian SMEs could be considered as innovative companies (EU-28

average is 287) Based on IUS 2016 data only 128 of the SMEs introduce some

kind of product or process innovations in Hungary a slight decrease compared to 2012

(141) that is less than half of the EU-28 average (306) These processes could be

explained by the high concentration of RampD activities in large companies 8 of all

Hungarian research units are responsible for half of the business expenditures on RampD

(KSH 2014) The small domestic firms lack their own funding for RampD and often wait for

public support in order to launch new RampI projects However such funding very often

does not reach the SMEs as they lack the level of tender and administration capacities

required by national and EU funds In general SMEs try to avoid taking risk and rarely

invest in RDI activities from their own pocket

8 If we exclude small companies with less than 10 employees the shares increase significantly but the pattern remains the same 9the highest is that of Swedenrsquos public administration (EPSIS 2013) 10See Hungarian E-government data at httpspublicadministrationunorgegovkben-usDataCountry-Informationid75-Hungary (Date of access 15 August 2016)

12

Policy response

It has been a high priority of the government to boost business RampD in the last decade

through tax incentives and direct measures supporting business RampD During the

planning of the 2014-2020 financial period the government has decided to allocate 60

of total available funding from the Structural Funds for economic development purposes

including non-refundable and refundable resources11 In 2016 research infrastructures

will receive fewer funds than in 2015 which is mainly due to the fade out support of the

ELI laser research laboratory12 Research projects receive less than 2 of the funds

slightly more than the international RDI activities Ongoing programmes such as the

ldquoIPR supportrdquo ldquoInnovation voucherrdquo ldquoInnovation ecosystemrdquo ldquoSmart specialisation

venture capital programmerdquo and ldquoPrototype product technology and service

developmentrdquo clearly focus on supporting research and innovation activities of SMEs and

start-ups

The largest part of domestic funding (37) from NKFIA is allocated to the National

Competitiveness and Excellence Program for enhancing technology transfer and for

Supporting Business RDI activities

Policy assessment

There are several measures in place that build on each other and form a fully-fledged

business RDI support mix Still the risk avoiding attitude both of the governmental

bodies and the SMEs (especially of the domestically owned ones) as well as the

unfavourable framework conditions are obstacles to accelerate the progress of

innovation In addition the lack of innovation experience the insufficient knowledge

base and human resources capacity hamper the development of the innovation process

In addition it depends a lot on the quality of the implementation of RDI measures in

order to achieve the expected outcomes What is more a systemic development of the

entire national innovation system is necessary so that to strengthen and synchronise all

the components of the innovation driving mechanisms

52 Challenge 2 Enhancing the cooperation between science

higher education and business

Description

Supporting cooperation between business and academia has been a high priority of STI

policy in Hungary that resulted in a number of positive developments such as the

growing number of corporate research centres and RampD labs (predominantly run by

multinationals) that work closely with academic partners Several RDI measures

supported the creation of this type of partnerships that usually last until they run out of

public funding Therefore sustainability of these partnerships is a real challenge as they

are not necessarily based on mutual interest of participating parties and lack longer-term

vision or commitment that could be financed with own resources later on The life-cycle

of business-academia partnerships is usually relatively short (1-2 years) and mainly

11 The Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) are of particular importance for STI policy that focus on five major objectives 1) business RDI activities 2) (technology and knowledge) transfer 3) (research) infrastructure 4) research projects and 5) international RDI According to the Annual Development Framework Programme clearly the business RDI activities will receive most of the funds in 2016 (71) among the main objectives of the GINOP sources This objective received the highest growth of available funds compared to 2015 (four times more) 12 In this way the transfer activities became the 2nd largest target with 15 of all funds (but the emphasis is put on the NKFIA sources in 2016 compared to GINOP in the previous year)

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

References

Colosseum (2015) A hazai klaszterakkreditaacutecioacutes rendszer feluumllvizsgaacutelata eacutes a

meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

Budapest

Convergence programme of Hungary 2016-2020 (2016)

httpeceuropaeueurope2020making-it-happencountry-specific-

recommendationsindex_enhtm

CRCB (2016) Versenyerősseacuteg eacutes korrupcioacutek kockaacutezatok A Magyar koumlzbeszerzeacutesek

statisztikai elemzeacutese 2009-2015 Corruption Research Centre Budapest Budapest

Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

Research Centre Institute for Prospective Technological Studies EUR 27322 EN

Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

Commission Joint Research Centre Institute for Prospective Technological Studies

EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Directorate-General for Research and Innovation

European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Luxemburg

ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

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() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

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Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 13: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

12

Policy response

It has been a high priority of the government to boost business RampD in the last decade

through tax incentives and direct measures supporting business RampD During the

planning of the 2014-2020 financial period the government has decided to allocate 60

of total available funding from the Structural Funds for economic development purposes

including non-refundable and refundable resources11 In 2016 research infrastructures

will receive fewer funds than in 2015 which is mainly due to the fade out support of the

ELI laser research laboratory12 Research projects receive less than 2 of the funds

slightly more than the international RDI activities Ongoing programmes such as the

ldquoIPR supportrdquo ldquoInnovation voucherrdquo ldquoInnovation ecosystemrdquo ldquoSmart specialisation

venture capital programmerdquo and ldquoPrototype product technology and service

developmentrdquo clearly focus on supporting research and innovation activities of SMEs and

start-ups

The largest part of domestic funding (37) from NKFIA is allocated to the National

Competitiveness and Excellence Program for enhancing technology transfer and for

Supporting Business RDI activities

Policy assessment

There are several measures in place that build on each other and form a fully-fledged

business RDI support mix Still the risk avoiding attitude both of the governmental

bodies and the SMEs (especially of the domestically owned ones) as well as the

unfavourable framework conditions are obstacles to accelerate the progress of

innovation In addition the lack of innovation experience the insufficient knowledge

base and human resources capacity hamper the development of the innovation process

In addition it depends a lot on the quality of the implementation of RDI measures in

order to achieve the expected outcomes What is more a systemic development of the

entire national innovation system is necessary so that to strengthen and synchronise all

the components of the innovation driving mechanisms

52 Challenge 2 Enhancing the cooperation between science

higher education and business

Description

Supporting cooperation between business and academia has been a high priority of STI

policy in Hungary that resulted in a number of positive developments such as the

growing number of corporate research centres and RampD labs (predominantly run by

multinationals) that work closely with academic partners Several RDI measures

supported the creation of this type of partnerships that usually last until they run out of

public funding Therefore sustainability of these partnerships is a real challenge as they

are not necessarily based on mutual interest of participating parties and lack longer-term

vision or commitment that could be financed with own resources later on The life-cycle

of business-academia partnerships is usually relatively short (1-2 years) and mainly

11 The Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) are of particular importance for STI policy that focus on five major objectives 1) business RDI activities 2) (technology and knowledge) transfer 3) (research) infrastructure 4) research projects and 5) international RDI According to the Annual Development Framework Programme clearly the business RDI activities will receive most of the funds in 2016 (71) among the main objectives of the GINOP sources This objective received the highest growth of available funds compared to 2015 (four times more) 12 In this way the transfer activities became the 2nd largest target with 15 of all funds (but the emphasis is put on the NKFIA sources in 2016 compared to GINOP in the previous year)

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

Budapest

Convergence programme of Hungary 2016-2020 (2016)

httpeceuropaeueurope2020making-it-happencountry-specific-

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CRCB (2016) Versenyerősseacuteg eacutes korrupcioacutek kockaacutezatok A Magyar koumlzbeszerzeacutesek

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Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

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Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

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EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

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performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

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European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

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ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

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KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 14: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

13

focused on one-off development or problem-solving An issue related to this is the

lacking growth and internationalisation ambitions of Hungarian firms

Hungary became one of the manufacturing centres of the European vehicle industry with

prominent international players as well as their suppliers that attract most talented

people but they havenrsquot got a strong demand for domestic RDI services to be delivered

by Hungarian SMEs and public institutions

Interchange of personnel between companies and academic institutions is not yet a

widely discovered practice because of low salaries in public research and lack of longer-

term funding for such initiatives

Policy response

There has been a series of measures that supported science-industry collaborations and

technology transfer activities in the past few years Currently there are several RDI

programmes in place that support collaborative research and innovation activities

between different sectors These are i) RampD Competitiveness and Excellence

Partnerships ii) Supporting innovation in international cooperation and iii) the so-called

Higher Education-Industrial Cooperation Centres (FIEK) Its main objective is the

development of the RampDampI background at universities that can provide innovation

capacity for the Hungarian economy In 2016 five FIEK projects were selected backing

with dominant local industrial players outside of Central-Hungary region Three FIEKs

will be established in Central-Hungary from the domestic NKFI Fund Furthermore the

Ministry for Human Capacities and the Hungarian Academy of Sciences signed an

agreement in June 2016 to deepen the cooperation between HAS and universities

including through the establishment of joint research groups and shared access to

research infrastructures

Policy assessment

Although there are programmes launched to support the cooperation between science

higher education and business they can foster the achievement of good results if they

exist for longer periods of time The programmes are constantly amended and the key

players have difficulties in perceiving them and adopting them in their own business

plans It would be better if this type of measures were organised in two phases for

example 3+3 years so that the key players are given the possibility to really work

together and achieve results

53 Challenge 3 Reinforcing the RampI governance and transfer mechanisms

Description

Frequent changes in the institutional set-up of the Hungarian RampI system in the past two

decades led to a situation in the financing period 2014-2020 in which RampI governance

lacks of experienced employees who can implement strategies quickly and run an

efficient and effective RampI funding system High level strategies such as the RDI Strategy

2013-2020 set ambitious goals but have not defined an appropriate feedback and

evaluation mechanism that could contribute to the fine-tuning and improvement of the

funding system The centralisation of all major RampI resources under the newly

established NKFIH (in January 2015) could potentially speed up and simplify the access

to RDI funding resources however companies especially SMErsquos complain in public fora

that the review of the proposals is slow and the administrative burden red tape is not

lowered in contracting as it was promised It should be noted that in the case of GINOP

and VEKOP programmes the Managing Authority (Ministry for National Economy) is the

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

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statisztikai elemzeacutese 2009-2015 Corruption Research Centre Budapest Budapest

Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

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Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

Commission Joint Research Centre Institute for Prospective Technological Studies

EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

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European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Luxemburg

ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

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via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

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Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 15: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

14

organisation responsible for the preparation of the funding decisions and contracting

Most of the applications ndash especially those supporting business RDI activities ndash are

evaluated by the state project evaluation system coordinated by the Prime Ministers

Office In some cases the applicants have to obtain a supporting policy judgement based

on the NKFIH peer review before applying at the Managing Authority It takes time for

this new system to work with full capacity

Apart from strong focus on reinforcing research excellence the government lacks a

holistic strategy concerning the development of an innovation ecosystem with dedicated

and well-funded institutions including support and transfer mechanisms that could

contribute to the exploitation of research results and to facilitate business-academia

collaboration more prominently with SMEs

Policy response

The National Research Technology and Innovation Office (NKFIH) was established in

January 2015 in order to ensure government level coordination of research and

innovation policies and to provide stable institutional background of predictable

financing as well as efficient and transparent RDI funding The programme portfolio of

the Office covers the entire innovation chain from basic research through applied and

experimental research to the commercialization of innovative products and services The

distribution of sources is based on three pillars supporting business RDI activities

supporting the collaboration of enterprises and research institutes higher education

technology transfer activities and strengthening the research infrastructure A number

of RDI programmes have been launched under coordination of the NKFIH since 2015

The new office also runs the database of RDI projects that are financed by public

resources

In the past few years a number of STI policy advisory bodies have been established

among which the most recent one is the National Science Policy and Innovation Board

(NTIT) whose task is to provide advice to the management of the NKFIH to evaluate

and recommend strategic issues of the development of the RampI system However the

activity of these bodies is very limited and has minor influence on budget decisions

More recently the Irinyi-Plan ie Industrial Development Strategy for 2016-2020 was

announced in March 2016 The aim of the Irinyi-plan is to further increase the share of

manufacturing in the Hungarian GDP with the support of seven key industries vehicle

and special machine production green economy ICT hardware production health and

food industries and the defence industry The aims are supported by the governmental

programmes for strengthening business RDI capacities for start-up and high-tech

innovation ecosystems both from national and EU sources (NGM 2016)

Policy assessment

Although innovation intermediaries such as regional innovation agencies and technology

transfer offices were established in universities in the past decade they couldnrsquot

facilitate a necessary cultural change of old attitudes They were unable to reach a

critical mass in size and specialisation and they could not prove their usefulness in

policy making The consequence is that these intermediaries have been ailing for years

because of lack of sufficient funding and loss of experienced staff

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

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recommendationsindex_enhtm

CRCB (2016) Versenyerősseacuteg eacutes korrupcioacutek kockaacutezatok A Magyar koumlzbeszerzeacutesek

statisztikai elemzeacutese 2009-2015 Corruption Research Centre Budapest Budapest

Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

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Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

Commission Joint Research Centre Institute for Prospective Technological Studies

EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

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European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Luxemburg

ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

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NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

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22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

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World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 16: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

15

54 Challenge 4 Supplying the RampI system with high-skilled

human resources

Description

Both the total number of research units and number of researchers (FTE) decreased in

2014-2015 (by 113 and 34 respectively) The decrease in the number of

researchers took place mainly in the public sector This trend has a strong implication on

the implementation of the RDI Strategy 2013-2020 that foresaw to increase the number

of the researchers to 56000 by 2020 This means that the number of researchers would

have to be increased by around 50 between 2015 and 2020 In more recent

communications the achievement of this target is pushed to be achieved by 2023

Notwithstanding it is a real challenge for the public research units to keep and motivate

researchers while they have to fulfil their teaching obligations raise funding and

collaborate with the business sector There is only a limited number of dedicated

researcher positions at higher education organisations and the majority of faculty

members can dedicate only a fraction of their time to research activities Since the

publication of the higher education concept entitled ldquoGear shift in higher educationrdquo in

late 2014 there has been no more recent strategy or implementation plan released that

would support the development of career path of faculty members and supporting

excellence in higher education that was foreseen by the draft strategy An update of the

higher education strategy was published in December 2016 that contains specific mid-

term objectives in order to improve the performance of the Hungarian HEI system

Both the share of science and engineering (SampE) graduates and the rate of participation

in life-long learning are rather low in international comparison and a significant gap

might be opening between the supply and demand for qualified SampE personnel in the

near future The stock of SampE graduates is 5 in Hungary which is lower than in the

Czech Republic (55) Poland (63) or the EU average (64) Likewise in the case of

new doctorate graduates the numbers are as follows Hungary 09 doctorate graduates

per 1000 people compared to the Czech Republic (17) Slovakia (24) Poland (06)

and the EU average (18)

Policy response

Both the RDI strategy 2013-2020 and the higher education strategy emphasised the

importance of strengthening of the research infrastructure and supporting excellence in

academia In a response new GINOP programmes support ldquoExcellence of strategic RampD

centresrdquo and ldquoStrengthening research infrastructures internationalisation and

networkingrdquo with the aim to provide better research conditions and higher salaries for

researchers From the domestic NKFI Fund a new post-doctoral research programme

was implemented in 2016 and in addition to this programme will be continuing in

2017and MTA established 11 new Momentum research groups Also the National

Programme in Brain Sciences aims to strengthen research centres and institutes

belonging to the international front line with euro206m and turn back brain-drain by

inviting and employing researchers working abroad with a total budget of euro181

Policy assessment

The Momentum programme of MTA could be seen as a successful example but it is only

accessible to relatively low number of excellent researchers Even if salaries were raised

by 15 in the higher education in 2016 still there is insufficient supply of researchers

especially in STEM fields This is mainly due to the very low salaries and the more

attractive career opportunities in the business sector and abroad Meeting the challenge

of increasing shortage of qualified human resources goes together with strengthening

the entire RampI and higher education system However currently the impact of the latest

reforms in the higher education system is still to be seen but the overall decreasing

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

Budapest

Convergence programme of Hungary 2016-2020 (2016)

httpeceuropaeueurope2020making-it-happencountry-specific-

recommendationsindex_enhtm

CRCB (2016) Versenyerősseacuteg eacutes korrupcioacutek kockaacutezatok A Magyar koumlzbeszerzeacutesek

statisztikai elemzeacutese 2009-2015 Corruption Research Centre Budapest Budapest

Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

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Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

Commission Joint Research Centre Institute for Prospective Technological Studies

EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

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European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

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EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Luxemburg

ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 17: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

16

funding of education and the decreasing HERD do not forecast a quick change in the

situation of HRST in the public and higher education sectors

6 Focus on creating and stimulating markets

It is a protracted challenge of the Hungarian RDI system to boost the business spherersquos

demand for RampD results and its competences to engage in innovation and create lead

markets for enhancing economic development The government has a broad programme

portfolio of enhancing business RDI capabilities increase innovation demand and

improve enterprisesrsquo international expansion These are complemented by such indirect

tools as the procurement purchases or the tax system instruments

The National RDI strategy (2013-2020) already identified the enlivening of the RampD

demand as one of the key issues in the development of the Hungarian RDI system It

has forecasted the enhancement of public sector demand and the use of pre-competitive

tools (such as pre-commercial procurement innovative procurement purchases and so

on) Among the instruments of the national S3 strategy procurements are listed again

as one of the important market instruments supporting the demand-side interventions

In Hungary the total number of procurements has increased significantly between 2012

and 2014 and stagnated in the last year In the volume of the procedures there is a

huge almost 80 increase in 2012-2013 which is thanks to a few unique cases and

since 2013 the volume is gradually decreasing by almost 10 in 2015 Within the

procedures the number and volume of EU co-funded procurements has significantly

decreased While the number of procurements co-funded by the EU gets up to 50 of

the total in 2014 it decreased to 46 in 2015 The decrease in volume was even bigger

from 49 to 38

There is no separate statistics available on the number and volume of RDI-related

procurements pre-commercial procurements or public procurements for innovation but

in some major cases the government intention is observable to align the procurement

commissions with the RDI policy objectives (such as the procurement of the Centre for

Budapest Transport for an electronic ticket system or some elements of the investment

of the underground line 4) Although various pilot and research projects are run with

Hungarian participation under the funding of the EU (eg RAPIDE EMAILE SMARTFIRE

projects) and a Hungarian PCP procedure has been adopted as early as 2013 (see RIO

country report 2015) it is still not a common practice According to the annual report of

the Public Procurement Authority of 2015 the committed advocacy of innovative

procurements (along with sustainable and socially important procurements) are among

the future aims

The public procurement act (Act CXLIII of 2015) provides some exemptions from certain

rules in the case of subsidised procurements among others for RampD and innovation for

job creation for training In these cases the publishers are exempt from the obligation

to launch a public procurement procedure already at a threshold of euro80k (HUF25m)

However the procurement procedures are suffering from some major weaknesses that

question the efficiency of this tool According to a recent report by the Corruption

Research Centre Budapest (CRCB 2016) the Hungarian public procurements are still

lacking competition and transparency and thus highly exposed for corruption In the

investigated period of 2009-2015 transparency has decreased risk of corruption

increased and the EU-funded projects face a higher level of corruption than the national-

funded ones

More direct intervention from the government is the re-launch of the Innovation Voucher

program to boost the demand for RDI services and results from the business sphere The

government has already had an innovation voucher program (called INNOCSEKK 2005-

2009) which was assessed as a highly successful program in terms of the number of

participating firms and of the funds employed A notable recommendation from an

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

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Colosseum (2015) A hazai klaszterakkreditaacutecioacutes rendszer feluumllvizsgaacutelata eacutes a

meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

Budapest

Convergence programme of Hungary 2016-2020 (2016)

httpeceuropaeueurope2020making-it-happencountry-specific-

recommendationsindex_enhtm

CRCB (2016) Versenyerősseacuteg eacutes korrupcioacutek kockaacutezatok A Magyar koumlzbeszerzeacutesek

statisztikai elemzeacutese 2009-2015 Corruption Research Centre Budapest Budapest

Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

Research Centre Institute for Prospective Technological Studies EUR 27322 EN

Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

Commission Joint Research Centre Institute for Prospective Technological Studies

EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Directorate-General for Research and Innovation

European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Luxemburg

ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 18: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

17

international evaluating panel was to broaden the involved firms beyond the innovative

RampD active SMEs (PRO INNO 2009) In 2015 the government launched a new innovation

voucher initiative (based on the EU Structural Funds) in line with the priorities of the

national S3 strategy The innovation voucher program aims to involve SMEs into the

innovation chain and intensify RDI activities of SMEs A strong feature of the program is

the supporting of university-industry collaborations Furthermore the FIEK programme

also targets the strengthening of the business sector demand for RDI Recently the

government has announced that it will elaborate a new bus production strategy for the

benefit of Hungarian bus producing companies and to preserve the long-standing

heritage in this specific field of the vehicle industry Such strategy may contribute not

only to the preservation of production facilities but to the revival and strengthening of

RDI capacities at various companies

A third tool of the Hungarian government to indirectly support business demand for RampD

and innovation is tax exemption For long (but repeatedly modified) there is an RampD tax

allowance opportunity for RampD carried out in the enterprisesrsquo own scope of activities In

2014 this tax allowance amounted to ~euro935m (HUF288b) (NRP 2016) A new feature of

the tax system in 2016 is the opportunity for local governments to allow a reduction of

local tax by 10 of the RampD direct costs It may also broaden the RDI capacity of forms

that they can now employ researchers with reduced labour tax In November 2016 the

minister of Ministry for National Economy announced a new tax exemption in the

modification of the tax system in 2017 According to the new regulation investors in

early stages of start-up companies could deduct 25 of their investment

STI policy and programme evaluation is not an integral part of the Hungarian RDI

system Monitoring of project development is a common practice but it is often soft and

the selection of indicators is often left for the choice of beneficiaries Programme

evaluation ndash that is an independent external evaluation ndash is much more incidental In

the case of programmes funded by the EU Structural Funds evaluations are compulsory

and most of them publicly available However in the case of programmes funded by the

NKFIA evaluations are ordered only in some cases Decisions about the termination and

launch of programmes ndash even if they are supporting basically the same aims ndash are made

based on the availability of funds and rarely on results and impacts

Nevertheless the president of the new National Research Development and Innovation

Office stresses in his public interventions that the new office will carry out an

assessment of the programmes and projects in order to learn about the impact of funded

projects This process has started in the NKFI Office but no reports of this assessment

have been published The new Act on Innovation (LXXVI of 2014) contains among the

basic principles the realisation of independent evaluations but no detailed

implementation regulations are attached to this principle yet New regulations have been

introduced in 2016 as the framework of the state project evaluation system (Act XXXIII

of 2016 and Governmental Decree 12162016 (IV 29)) This system relies on civil

servants who will carry out the evaluation work besides their daily tasks Each proposal

will be evaluated by two experts employed and paid by the state

The Act on Legislation (CXXX of 2010) made it compulsory to do an ex ante and ex post

impact assessment of all new laws and pieces of government legislation Among the

aspects for assessments the burden of bureaucracy the environmental and health

consequences have to be considered as the priorities but no particular mention is made

to RampD andor innovation related impacts It is not part of the Hungarian policy-making

practice and procedure to prepare evaluations or analysis on the impact of legislation

and it is clearly not a practice in the STI policy The NKIFH takes efforts to change this

situation The first step on this way was that the Government approved and published

the Government Decree No 4332016 about the rules of the evaluation of RampI

programmes and projects financed by the National Research Development and

Innovation Fund In 2011 the government launched a trade opening towards the East

trying to boost export to the post-soviet states and Asia However currently (2015) 81

of the Hungarian export is oriented to the EU member states and this share has even

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

References

Colosseum (2015) A hazai klaszterakkreditaacutecioacutes rendszer feluumllvizsgaacutelata eacutes a

meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

Budapest

Convergence programme of Hungary 2016-2020 (2016)

httpeceuropaeueurope2020making-it-happencountry-specific-

recommendationsindex_enhtm

CRCB (2016) Versenyerősseacuteg eacutes korrupcioacutek kockaacutezatok A Magyar koumlzbeszerzeacutesek

statisztikai elemzeacutese 2009-2015 Corruption Research Centre Budapest Budapest

Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

Research Centre Institute for Prospective Technological Studies EUR 27322 EN

Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

Commission Joint Research Centre Institute for Prospective Technological Studies

EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Directorate-General for Research and Innovation

European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Luxemburg

ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 19: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

18

increased from 78 in 2010 The main tool for facilitating the Hungarian export activity

is the Hungarian National Trade House that aims to support enterprises that are capable

of exporting and finding adequate business partners in the international markets The

trading house provides state guarantee to their partners in order to facilitate smooth

trade activities and it has a commercial presence in almost 40 countries of four

continents Furthermore it has a dedicated start-up programme entitled Innotrade that

provides exhibition opportunities and participations in international start-up events for

the enterprises that seek international market entry The exports to the EU-28 have

grown by 28 to euro724m between 2010 and 2015 while during the same time the extra-

EU exports have increased by 6 (although in the middle of the time period it was much

higher)

In this context the strategic collaboration agreements should be mentioned that are

made between the government and large multinational companies as well as domestic

companies These agreements aim at increasing investments export activity and

broadening the collaboration with Hungarian companies higher education organisations

and research centres Until end of November 2016 the government signed 72 strategic

collaboration agreements13

Other forms of support for the internationalisation of domestic enterprises are launched

under the GINOP and VEKOP programmes (continuous since 2015) The supported

activities by these programmes include the participation in trade fairs business

meetings international networking and related job creation

More specifically in the field of RDI SMEs may apply for funding available for the

participation in the Horizon2020 SME development tool for the participation in

international project consortium development for the participation in the EUREKA or

ERA-NET initiatives

Inward FDI are also treated as a priority by the Hungarian government Large subsidies

are available on an individual basis for multinational companies who are establishing now

ndash or developing existing ndash production facilities The main agency to support inward

investments is the Hungarian Investment Promotion Agency (HIPA)

13See at httpwwwkormanyhuhukulgazdasagi-es-kulugyminiszteriumstrategiai-partnersegi-megallapodasok (Date of access 22 November 2016)

19

References

Colosseum (2015) A hazai klaszterakkreditaacutecioacutes rendszer feluumllvizsgaacutelata eacutes a

meguacutejiacutetaacutesaacutera vonatkozoacute javaslatok elkeacutesziacuteteacutese a hazai helyzetkeacutep eacutes a nemzetkoumlzi

peacuteldaacutek alapjaacuten valamint javaslatteacutetel a 2014-20-as időszakra vonatkozoacute

klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

Budapest

Convergence programme of Hungary 2016-2020 (2016)

httpeceuropaeueurope2020making-it-happencountry-specific-

recommendationsindex_enhtm

CRCB (2016) Versenyerősseacuteg eacutes korrupcioacutek kockaacutezatok A Magyar koumlzbeszerzeacutesek

statisztikai elemzeacutese 2009-2015 Corruption Research Centre Budapest Budapest

Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

Research Centre Institute for Prospective Technological Studies EUR 27322 EN

Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

Commission Joint Research Centre Institute for Prospective Technological Studies

EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Directorate-General for Research and Innovation

European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Luxemburg

ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 20: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

19

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klaszterfejleszteacutesi koncepcioacute tartalmaacutera Colosseum Budapest Kft Evaluation report

Budapest

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statisztikai elemzeacutese 2009-2015 Corruption Research Centre Budapest Budapest

Dőry T (2015) RIO Country Report Hungary 2014 European Commission Joint

Research Centre Institute for Prospective Technological Studies EUR 27322 EN

Dőry T-Slavcheva M (2016) RIO Country Report Hungary 2015 European

Commission Joint Research Centre Institute for Prospective Technological Studies

EUR 27863 EN

EC (2015a) Survey on the access to finance of enterprises (SAFE) Analytical Report

2015 European Commission Directorate-General for Internal Market Industry

Entrepreneurship and SMEs Brussels

EC (2015b) 2015 SBA Fact Sheets Hungary European Commission Brussels

EC (2015c) Annual Report on European SMEs 2014 2015 SMEs start hiring again SME

performance review 20142015 Final report November 2015

EC (2015e) Pre-Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Directorate-General for Research and Innovation

European Commission Brussels

EC (2016a) Country Report Hungary 2016 Including an In-Depth Review on the

prevention and correction of macroeconomic imbalances Commission Staff Working

Document Brussels

EC (2016b) European Innovation Scoreboard 2016

httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_hu

EC (2016c) Commission Staff Working Document Country Report Hungary 2016

Including an In-Depth Review on the prevention and correction of macroeconomic

imbalances SWD(2016) 85 final European Commission Brussels 2622016

EC (2016d) Peer Review of the Hungarian Research and Innovation System Horizon

2020 Policy Support Facility Luxemburg

ECFIN (2016) European economic forecast ndash Autumn 2016 Hungary EC

httpeceuropaeueconomy_financeeuforecasts2016_autumnhu_enpdf

EPSIS (2013) European Public Sector Innovation Scoreboard 2013 A pilot exercise

European Commission Directorate-General Enterprise and Industry Brussels

ERC (2014) Organisational Evaluation of the Hungarian Scientific Research Fund

(OTKA) Evaluation

ReporthttpwwwesforgfileadminPublic_documentsPublicationsotka_evaluation_

01pdf

EVCA (2015) Central and Eastern Europe Statistics 2014 An EVCA Special Paper Edited

by the EVCA Central and Eastern Europe Task Force August 2015

Government (2013) Tudomaacutenypolitikai strateacutegia 2014-2020 Taacutersadalmi partnerseacutegre

szaacutent vitaanyag (Science Policy Strategy 2014-2020 Concept for public

consultation) Ministry of Human Capacities September 2013 Budapest

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 21: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

20

Government (2014) Fokozatvaacuteltaacutes a felsőoktataacutesban A teljesiacutetmeacutenyelvű felsőoktataacutes

fejleszteacuteseacutenek iraacutenyvonalai (Gear shift in higher education Directions of performance

based development of higher education) Ministry of Human Capacities Budapest

Hegyi FB (2015) Stairways to Excellence Country Report Hungary

HVCA (2016) Venture capital and private e quity overview Hungary ndash 2015 wwwhvcahu

Irinyi Plan (2016) Irinyiterv Az innovatiacutev iparfejleszteacutes iraacutenyainak meghataacuterozaacutesaacuteroacutel

(Irinyi Plan Definition of directions of innovative industry development) Ministry for

National Economy February 2016

IUS (2015) Innovation Union Scoreboard 2015 European Commission Directorate-

General for Internal Market Industry Entrepreneurship and SMEs Bruxelles

KSH (2014) Kutataacutes eacutes fejleszteacutes 2013 (Research and development 2013) National

Statistical Office Budapest

KSH (2015a) A KSH jelenti 2015 I-II negyedeacutev (The KSH reports I-II quarter 2015)

Hungarian Central Statistical Office Budapest September 2015

KSH (2015b) Magyarorszaacuteg 2014 (Hungary 2014) Hungarian Central Statistical Office

Budapest

KSH (2015c) Kutataacutes-fejleszteacutes 2014 (előzetes adatok) (Research-development 2014

ndash preliminary data) 11 July 2015 Hungarian Central Statistical Office Budapest

KSH (2015d) Kutataacutes-fejleszteacutes 2014 Statisztikai Tuumlkoumlr (Research-development 2014

ndash Statistics in mirror) 30 October 2015 Hungarian Central Statistical Office

Budapest

KSH (2016a) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 II negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgde1606

KSH (2016b) Gyors taacutejeacutekoztatoacutek ndash Bruttoacute hazaitermeacutek (GDP) 2016 I negyedeacutev

httpwwwkshhugyorstajekoztatokhudocumentgdp1603

KSH (2016c) Gyorstaacutejeacutekoztatoacutek ndash Foglalkoztatottsaacuteg 2016 aacuteprilis-juacutenius

httpwwwkshhugyorstajekoztatokhudocumentfog1606

KSH (2016d) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2016 juacutenius

httpwwwkshhugyorstajekoztatokhudocumentepi1606

KSH (2016e) Gyors taacutejeacutekoztatoacutek ndash Eacutepiacutetőipar 2015 januaacuter-december

httpwwwkshhugyorstajekoztatokhudocumentepi1512

KSH (2016f) STADAT ndash Idősoros eacutevesadatok- Kutataacutes fejleszteacutes

httpwwwkshhustadat_eves_3_4

KSH (2016g) STADAT ndash Idősoroseacutevesadatok ndash Ipar

httpwwwkshhustadat_eves_4_2

KSH (2016h) STADAT ndash Idősoros eacutevesadatok ndash Gazdasaacutegi eacutes

nonprofitszervezetekhttpwwwkshhustadat_eves_3_2

KSH (2016i) Taacutejeacutekoztataacutesi adatbaacutezis Kutataacutes-fejleszteacutes

httpstatinfokshhuStatinfohaViewerjsp

Law LXXVI (2014) 2014 eacutevi LXXVI toumlrveacuteny a tudomaacutenyos kutataacutesroacutel fejleszteacutesről eacutes

innovaacutecioacuteroacutel (Law on scientific research development and innovation) (approved on

25 November 2014)

MNB (2015) Elemzeacutes a hazai kockaacutezati tőkealap-kezelők eacutes alapok műkoumldeacuteseacuteről

(Analysis of the operation of domestic venture capital funds) January 2015

Hungarian National Bank Budapest

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 22: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

21

NGM (2013) S3 Feheacuter Koumlnyv Magyarorszaacuteg intelligens specializaacuteloacutedaacutesaacutenak iraacutenyai (S3

White Book Smart Specialisation Directions of Hungary) Draft for public consultation

Ministry for National Economy November 2013

NIH (2012) A Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alapaacuteltal finansziacuterozott paacutelyaacutezati

portfolio hasznosulaacutesaacutenak elemzeacutese 2004-2011 (Analysis of the utilisation of the

project portfolio financed by the Research and Technological Innovation Fund 2004-

2011) January 2012 National Innovation Office Budapest

NIH (2013) KFI Tuumlkoumlr 2 Nők a KFI teruumlleteacuten Budapest

NIH (2014a) National Smart Specialisation Strategy November 2014 National

Innovation Office Budapest

NIH (2014b) Research Infrastructures in Hungary November 2014 National Innovation

Office Budapest

NIKS (2014) Nemzeti Infokommunikaacutecioacutes Strateacutegia 2014-2020 (National Information

Technology Strategy 2014-2020)

NRP (2014)National Reform Programme 2016 of Hungary March 2016 Government of

Hungary

NRP (2015)National Reform Programme 2015 of Hungary April 2015 Government of

Hungary

NRP (2016) National Reform Programme 2016 of Hungary Marcs 2016 Government of

Hungary

OECD (2008)Reviews of Innovation Policy ndash Hungary Paris OECD

OECD (2014)OECD Science Technology and Industry Outlook 2014 OECD Publishing

Paris

OECD (2016a) Compendium of Productivity Indicators 2016 OECD Paris

OECD (2016b) OECD Economic Surveys Hungary

wwwoecdorgecosurveyseconomic-survey-hungaryhtm

Peacutenzuumlgykutatoacute (2016) A Magyar gazdasaacuteg helyzete eacutes kilaacutetaacutesai (2015-2016)

httppenzugykutatohusitesdefaultfilesfilesPenzugykutato_Prognozis_201620

marc_Sajtotajpdf

PRO INNO (2009) INNOCSEKK ndash Innovaacutecioacutes voucher alapuacute taacutemogataacutesi rendszer

bevezeteacutese

RDI Strategy (2013) Befekteteacutes a joumlvőbe (Investment into the Future National

Research-development and Innovation Strategy 2013-2020) June 2013 Ministry for

National Economy National Innovation Office Budapest

Runway Budapest 2020 ndash A Start-up Credo Budapest HUB working group and

Ministry for National Economy 2013

Szerb et al (2014) Mennyire versenykeacutepesek a Magyar kisvaacutellalatok A Magyar

kisvaacutellalatok (MKKV szektor) versenykeacutepesseacutegeacutenek egyeacuteni-vaacutellalati szintű meacutereacutese eacutes

complex vizsgaacutelata (How competitive are the Hungarian SMEs Measurement and

complex analysis of the competitiveness of Hungarian SMEs) In Marketing eacutes

Menedzsment 48 eacutevf pp 3-21

Szerb L (2016) Entrepreneurship in an illiberal unorthodox country The case of

Hungary blog post at httpsthegediorgentrepreneurship-in-an-illiberal-

unorthodox-country-the-case-of-hungary

WEF (2015) The Global Competitiveness Report 2015-2016 World Economic Forum

Geneva

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 23: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

22

WEF (2016) The Global Competitiveness Report 2016-2017 World Economic Forum

Geneva

World Bank (2016a) Doing Business 2017 Equal Opportunity for All 14th edition

International Bank for Reconstruction and Development The World Bank

Washington DC

World Bank (2016b) Doing Business 2016 Equal Opportunity for All Economic Profile

Hungary 14th edition International Bank for Reconstruction and Development The

World Bank Washington DC

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 24: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

23

Abbreviations

BERD Business Expenditures for Research and Development

EFOP Emberi-Erőforraacutes Fejleszteacutesi Operatiacutev Program (Human

Resource Development Operational Programme)

EIS European Innovation Scoreboard

EMMI Emberi Erőforraacutesok Miniszteacuteriuma (Ministry of Human

Capacities)

ERA European Research Area

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

EU-28 European Union including 28 Member States

FDI Foreign Direct Investments

FP European Framework Programme for Research and Technology

Development

FIEK Felsőoktataacutesi eacutes Ipari Egyuumlttműkoumldeacutesi Koumlzpont (Higher

Education and Industrial Cooperation Centre)

FTE Full-time equivalent

GBAORD Government Budget Appropriations or Outlays on RampD

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on RampD

GINOP Gazdasaacutegfejleszteacutesi eacutes Innovaacutecioacutes Operatiacutev Program (Economic

Development and Innovation Operational Programme)

GOP Gazdasaacutegfejleszteacutesi Operatiacutev Program (Economic Development

Operational Programme)

GOVERD Government Intramural Expenditure on RampD

HERD Higher Education Expenditure on RampD

HES Higher Education Sector

HUF Hungarian Forint

IP Intellectual Property

KEHOP Koumlrnyezeti eacutes Energiahateacutekonysaacutegi Operatiacutev Program

(Environmental and Energy Efficiency Operational Programme)

KSH Koumlzponti Statisztikai Hivatal (Hungarian Central Statistical

Office)

KTIA Kutataacutesi eacutes Technoloacutegiai Innovaacutecioacutes Alap (Research and

Technological Innovation Fund)

MISZ Magyar Innovaacutecioacutes Szoumlvetseacuteg (Hungarian Association of

Innovation)

MTA Magyar Tudomaacutenyos Akadeacutemia (Hungarian Academy of

Sciences)

NAV Nemzeti Adoacute- eacutes Vaacutemhivatal (National Tax and Customs

Administration)

NFM Nemzeti Fejleszteacutesi Miniszteacuterium (Ministry of National

Resources)

NEKIFUT Nemzeti Kutataacutesi Infrastruktuacutera Felmeacutereacutes eacutes Uacutetiterv (National

Research Infrastructure Survey and Roadmap)

NFK Nemzeti Fejleszteacutesi Kormaacutenybizottsaacuteg (National Development

Cabinet)

NFM NemzetiFejleszteacutesiMiniszteacuterium (Ministry of National

Development)

NGM Nemzetgazdasaacutegi Miniszteacuterium (Ministry for National Economy)

NKFIH Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Hivatal (National

Research Development and Innovation Office)

NKFIA Nemzeti Kutataacutesi Fejleszteacutesi eacutes Innovaacutecioacutes Alap (National

Research Development and Innovation Fund)

NIH Nemzeti Innovaacutecioacutes Hivatal (National Innovation Office)

NIS National Innovation System

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 25: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

24

NKITT Nemzeti Kutataacutesi Innovaacutecioacutes eacutes Tudomaacutenypolitikai Tanaacutecs

(National Research Innovation and Science Policy Council)

NKTH Nemzeti Kutataacutesi eacutes Technoloacutegiai Hivatal (National Office for

Research and Technology)

NRP National Reform Programme

NTIT Nemzeti Tudomaacutenypolitikai eacutes Innovaacutecioacutes Testuumllet (National

Science Policy and Innovation Board)

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic Co-operation and Development

OP Operational Programme

OTKA Orszaacutegos Tudomaacutenyos Kutataacutesi Alapprogramok (National

Scientific Research Fund)

PcP Pre-commercial Procurement

PCT Patent Cooperation Treaty

PPS Purchasing Power Standard

PRO Public Research Organisation

RampD Research and Development

RampDampI Research and Development and Innovation

RI Research Infrastructure

RIUuml Regionaacutelis Innovaacutecioacutes Uumlgynoumlkseacuteg (Regional Innovation Agency)

ROP Regionaacutelis Operatiacutev Program (Regional Operational Programme)

RTDI Research Technological Development and Innovation

SampE Science and Engineering

S3 Nemzeti Intelligens Szakosodaacutesi Strateacutegia (National Smart

Specialisation Strategy)

SampT Science and Technology

SF Structural Funds

SME Small and Medium Sized Enterprise

SZTNH Szellemi Tulajdon Nemzeti Hivatala (Hungarian Intellectual

Property Office)

STI Science Technology and Innovation

TAacuteMOP Taacutersadalmi Meguacutejulaacutes Operatiacutev Program (Social Renewal

Operational Programme)

TOP Teruumllet- eacutes Telepuumlleacutesfejleszteacutesi Operatiacutev Program (Territorial

and Settlement Development Operational Programme)

TTO Technoloacutegiatranszfer Iroda (Technology Transfer Office)

TTPK Tudomaacuteny- eacutes Technoloacutegiapolitikai Kolleacutegium (Science and

Technology Policy Council)

VC Venture Capital

VEKOP Versenykeacutepes Koumlzeacutep-Magyarorszaacuteg Operatiacutev Program

(Competitive Central-Hungary Operational Programme)

VKE Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Egyuumlttműkoumldeacutesek

(Competitiveness and Excellence Cooperation)

VKSZ Versenykeacutepesseacutegi eacutes Kivaacuteloacutesaacutegi Szerződeacutesek (Competitiveness

and Excellence Cooperation Programme)

WEF World Economic Forum

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 26: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

25

Factsheet

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 27: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

26

List of Figures

Figure 1 Government funding of the total GERD

Figure 2 BERD intensity broken down by most important macro sectors (A= agriculture

C= manufacture G_N=services)

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 28: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

HOW TO OBTAIN EU PUBLICATIONS

Free publications

bull one copy

via EU Bookshop (httpbookshopeuropaeu)

bull more than one copy or postersmaps

from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm)by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) orcalling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) ()

() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)

Priced publications

bull via EU Bookshop (httpbookshopeuropaeu)

Europe Direct is a service to help you find answers

to your questions about the European Union

Freephone number ()

00 800 6 7 8 9 10 11 () The information given is free as are most calls (though some operators phone boxes or hotels may charge

you)

More information on the European Union is available on the internet (httpeuropaeu)

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9

Page 29: RIO Country Report 2016: Hungary - COnnecting …portfolio of RDI calls is available on the NKFIH website1. Until the end of September 2016, the NKFIH published RDI calls with a total

KJ-N

A-2

8524-E

N-N

doi10276096252

ISBN 978-92-79-66732-9


Recommended